Case Studies
Accounting Advisory
Background
Pharmaceutical company had cleared FDA approvals and was moving toward commercialization and shipment of their first product. Sales were to distribution centers who then sold to pharmacies. There was a six-month post expiration right of return from the pharmacies to the DCs then back to the company itself.
Pain Point
Company had no prior history of shipping product and could not estimate the amount of product which would ultimately be sold-through to patients receiving after having received a prescription from their doctors. They did not have in-house technical accounting expertise and were concerned about meeting the requirements to realize revenues under US GAAP.
Approach
Researched the applicable accounting standards under the Financial Accounting Standards Board’s Accounting Standard Codification as well as multiple “Big-4” narratives for revenue recognition as applicable to this situation. Drafted a thorough white-paper documenting the necessary considerations, analysis and conclusions. Reviewed the whitepaper with the company and their auditors to gain alignment on the accounting treatment in advance of product shipment.
Results
Company had a properly documented white-paper signed-off on prior to shipping product and their year-end audit. They knew and understood the requirements to realize revenues and cost-of-goods-sold for their current and future products.
Transactional M&A Readiness
Background
PE backed $5m professional services & frontier technology company servicing the A&D, industrial and consumer electronics markets experiencing hyper-growth. Company had won a $20m, 2-year period of performance funded R&D effort with a potential $150m procurement order if successful. Sponsor was looking for an exit.
Pain Point
Outside bookkeeper was the sole finance team. They did not know how to estimate costs or measure revenue for funded R&D efforts under US GAAP. Projected near-term revenues were $15m and >$100m in 5 years. Company did not have reliable forecast or cash flow models. Needed to professionalize budgeting, forecasting, accounting and processes.
Approach
Provided a fractional CFO for an estimated 16-20 hours per week to overhaul the budgeting, forecasting, reporting and close processes. Worked cross-functionally with the leadership team to understand the businesses KPIs, processes and develop cross-departmental alignment of corporate objectives and initiatives. Executed sell-side QoE with a “Top 6” accounting firm and engaged a world-class investment banker to bring the company to market.
Results
Built a dynamic 7-year rolling forecast and cash flow model to support sponsor reporting and a 13-week detailed cash flow. Redesigned the close process reducing the calendar from 30 days to 5 exceeding PE and Bank requirements. Successful exit for legacy PE firm achieving a 400% return on invested capital.
Realization of an Asset - M&A
Background
Private equity firm acquired an AV integration business with $250m annual revenue. Over the hold period they acquired 9 bolt-on businesses expanding geographic coverage and service offerings. Annual revenue run-rate was approaching $1b, the fund wanted to bring the company to market. They hired a global firm to perform a market research study and were interviewing investment bankers.
Pain Point
While the organization had executed 9 acquisitions, none had been integrated. All were running on legacy ERPs and the consolidation was manual. They wanted to articulate the growth story from both a company and client view and were unable to aggregate the data in a way which would hold up under buy-side QoE.
Approach
Brought in a team of 8 consultants and a PMO to aggregate the data necessary to support the research study and sell-side process. Identified the largest sites which amounted to >90% of the consolidated revenues, then identified the customers which aggregated to >90% of the 90% yielding > 80% consolidated revenue coverage. Travelled to these sites, reviewed 100% of the respective customers files and populated the data in a comprehensive customer and revenue database. Period reviewed covered both pre- and post- acquisition customers at the parent and subsidiary levels.
Results
Provided a data book of company and customer revenue patterns and success stories. This book was leveraged by both McKinsey in their market research study and the investment banker in the CIM. The company and the PE Fund were able to execute a successful sell-side process.
Transformation & Interim Leadership
Background
Listed (NASDAQ) $250m aerospace and defense imbedded solutions and professional services firm’s Corporate Controller was going on maternity leave. The company had been without a Chief Accounting Officer for twelve months; the Board and Audit Committee mandated that they bring in an interim resource to cover the maternity leave.
Pain Point
Company had just restated an earnings release due to an issue with their financial statement close process. The Board and Audit Committee were not confident in the Assistant Controller and their ability to close the books without effective and qualified oversight. The CFO was not an accountant and could not provide this guidance to the more junior staff.
Approach
Provided a full-time Controller level resource to start immediately overlapping with the company’s Controller for the last two weeks prior to going out on maternity leave. Met with the existing team and reviewed the prior month and quarter’s close packages to gain an understanding of the business and the processes. Implemented certain process improvements and encountered a prior-period adjustment that required significant assessment and potentially a big “R” restatement. Worked on the same with the company’s “Big-4” audit firm.
Results
Improved the Company’s close calendar from 20 days to 4. Researched and evaluated the prior-period adjustment and worked with the auditors to negate the need for a big R restatement rather a 2-line disclosure in the 10-Q. Seamlessly integrated into the organization and then handed the Controllership back to the incumbent upon her return from leave.
Buy-Side Support and Audit Readiness
Background
Large-Cap listed (NASDAQ) software company was executing a multi-year acquisition growth strategy. Target companies were typically founder owned and operated and may or may-not have been audited. Acquirer needed support getting target companies ready for acquisition by a listed company including preparing necessary support for financial diligence.
Pain Point
Target being acquired did not have quality financial records or financial statements which would meet a Public Company Accounting Oversight Board’s audit documentation standards and were unable to provide “good” financial data to the data-room. The acquirer needed audited financial statements to support an SEC 8-k filing announcing the acquisition post-close.
Approach
Provided a Controller level resource to operate as the controller of the acquiree. Recast the targets historical financial statements in accordance with US GAAP and developed proper accounting reconciliations for all critical balance sheet accounts. Worked with the audit firm to complete a two-year audit and developed the necessary documentation to support the post-closing integration and purchase accounting. Populated the data-room with quality financial support as needed.
Results
Clean audit opinion issued for the period under audit and a successful acquisition and subsequent 8-k filing by the acquirer. The acquirer's accounting department had what they needed to document the purchase accounting and recognize revenues and expenses post-close. Retained by the acquirer to support post-close integration services.