CASE STUDIES
RESPONSIVENESS, TECHNICAL ACUMEN & EXECUTIVE PRESENCE
Mining Technology
THE NEED
A tech company in the mining industry needed a pro forma forecast and valuation in order to complete its next round of funding. A Big 4 firm quoted them five times our price for the basic pro forma work and they required nearly three weeks to mobilize.
HOW WE ADDED VALUE
After an initial call from the CEO on a Friday we were provided the Company's historical financial information and basic assumptions. We worked throughout the weekend to ensure the assumptions and forecasts were robust and provided our first draft deliverable on Sunday evening. We were then able to review the document with the company's board and technical advisers and provided a final deliverable by the following Friday.
RESULTS
In calls with underwriter counsel and the funding group we were able to demonstrate our technical accounting and finance acumen, noting no required follow-up and high praise for the company's ability to generate a detailed and well supported pro forma forecast. The funding was completed and capital committed on the day the Big 4 firm was to have started their work. In addition, we did the work for one-fifth of the quoted Big 4 fee.
FINANCIAL LEADERSHIP FOR START-UPS
Agri-Business
THE NEED
A well-funded startup in the U.S. agriculture industry was without a CFO and in need of a fractional CFO as it looked to close on its series A funding round.
HOW WE ADDED VALUE
Initial calls were on a Monday and we were on-site on Wednesday having agreed to provide a fractional CFO resource for approximately two days a week. We were able to get the monthly books closed and initial forecasts, valuation and data room reviewed for the four months the company had been without a finance chief. Since that time we've been leading the financial and management reporting, capital management, governance & compliance, internal controls, and talent management for the company which has grown substantially and is about to close on its first investment grade funding round.
RESULTS
We quickly mobilized and have been leading the financial and management effort ever since. The company got a seasoned Big 4 resource for a fraction of what it would have had to pay a full time equivalent and has access to an entire firm as its CFO not just a lone temporary employee.
QUALITY OF EARNINGS
Oil and Gas Industry
THE NEED
A U.S. midstream oil and gas company had doubts about an acquisition it was closing. The initial firm that performed the quality of earnings (QoE) work appeared to have completed the work quickly and hastily, and the company wanted a secondary review.
HOW WE ADDED VALUE
Given our extensive Big 4 audit experience, we started with a top-down, risk-based approach and although no red flags were noted within the revenue and receivables and other significant risk areas we noted an unusual amount had been spent on legal costs year-to-date. Upon digging further and after multiple denials for the legal expense detail from the acquisition target we noted the target had not disclosed highly material legal contingencies nor did it plan to prior to the closing date of the acquisition.
RESULTS
Our client walked away from the acquisition and we were directly credited with the decision as a result of our QoE work and attention to detail.
VALUE STREAM OPTIMIZATION THROUGH TOP-DOWN ASSESSMENT
Reservoir Consulting, Engineering, and Operation Services
THE NEED
Our PE client executed a multiple business combination transaction which aggregated a reservoir solutions consulting firm; oilfield manufacturing firm, and rental/services firm with a total deal value over $300MM and intended IPO exit.
HOW WE ADDED VALUE
The team started with facilitating a board/management level vision statement for the NEWCO then developed optimal capital management process flow, and job expectations based on that vision statement. We then engaged with key internal resources to ensure a high level of ownership n the organizational change.
RESULTS
The NEWCO actualized operations over 2 years and successfully executed an IPO on the NASDAQ at a valuation cap over $1B.
PRODUCT DIFFERENTIATION AND COMPETITIVE BARRIERS BUILD VALUATION CONFIDENCE.
Upstream Analytic Software
THE NEED
Our PE client was competitively bidding on the acquisition of an upstream analytic software platform nested within a large investment advisory platform. The software platform was used for internal purposes and analyst reports were sold to other financial institutions. The software was highly sophisticated but raw from a commercialization and UI perspective. We were engaged to evaluate separation and stand-up considerations as well as perform a market assessment.
HOW WE ADDED VALUE
We performed a detailed capability assessment of the target upstream modeling tools against current market participants and identified significant competitive advantages with high technical barriers. We also evaluated existing commercial models deployed by competitors. Using this information, we worked with our PE client to develop a premium product market penetration strategy focused on penetrating upstream operators.
RESULTS
As a result of diligence, our PE client developed a high level of confidence in the target software’s competitive advantage and technical barriers. The bid got very competitive and this confidence was needed to support the valuation required to secure the transaction. Five years later, they exited the investment at ~8.5x.
NOT ALL BOLT-ONS ARE THE SAME; DEAL THESIS ASSUMPTIONS SHOULD BE EVALUATED
Oilfield Equipment Manufacturer
THE NEED
Our PE client was contemplating the simultaneous purchase of two competitors of an existing oilfield equipment portfolio company. One target was small with differentiated technology while the other was large and would deepen the portfolio company customer base and penetration. Our client was most interested in combination synergy potential and integration considerations. We were engaged to perform financial, commercial and operational diligence.
HOW WE ADDED VALUE
Our diligence quickly identified manufacturing synergy opportunities and combined revenues at-risk not previously contemplated within the deal model. SIgnificant customer overlap between the portfolio company and the larger target put combined revenue at risk. Our commercial diligence also identified several red flags related to market perceptions of the larger target company’s product and management team.
RESULTS
As a direct result of our diligence findings, our client decided to acquire only the smaller of the two competitors with the differentiated technology. In the years subsequent to the transaction, our client has grown its market share by approximately 20%, much of which has come from the target company not acquired.
BUSINESS UNIT INTERDEPENDENCE AND SYNERGY MATTER ON SEPARATION
Oil Refining & Retail
THE NEED
A foreign investor was dissolving a JV with its US partner by separating the assets into two equally sized businesses with a cash true-up for any value differential. The foreign investor was not the primary JV operator and had limited operational knowledge. We were engaged to provide an independent assessment of the business split and identify separation considerations.
HOW WE ADDED VALUE
Immediately upon engaging we identified significant gaps and faulty assumptions within the deal separation model. The business being separated contained three units and the model did not adequately reflect the interdependence of the cash flows and profitability between the three. In two weeks, we built an integrated deal model to better reflect these interdependencies.
RESULTS
Immediately upon engaging we identified significant gaps and faulty assumptions within the deal separation model. The business being separated contained three units and the model did not adequately reflect the interdependence of the cash flows and profitability between the three. In two weeks, we built an integrated deal model to better reflect these interdependencies.
