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BUY-SIDE DUE DILIGENCE

SELL-SIDE DUE DILIGENCE

BUSINESS ADVISORY

PORTFOLIO MONITORING

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BUY-SIDE DUE DILIGENCE

Our buy-side due diligence product can be tailored to meet the needs of your specific transaction. Buy-side services are typically used by private equity firms considering the acquisition target, by cash flow lenders (senior and subordinated) as part of the underwriting process, and by corporations assessing a potential add-on to their existing platform.

With the ultimate goal of understanding the target company's underlying business risks, operational strengths and weaknesses, value drivers, and the critical issues impacting the transaction, our full-scope due diligence engagements typically include the following:

  • Quality of Earnings — Identifying quality of earnings adjustments through comprehensive financial statements analysis to provide a clear view of the targetís recurring EBITDA.
  • Impact of Accounting Policies on EBITDA — Evaluating accounting policies including revenue recognition allowances, inventory valuation, and accruals and determining their impact on EBITDA.
  • Business and Operational Trends — Performing detailed income statement analysis including historical revenue drivers, gross margin, and SG&A analysis
  • Balance Sheet and Other Contingencies — Performing detailed balance sheet analysis to understand historical working capital needs, analyzing quality of assets, capex requirements, inter-company transactions, and identifying potential contingencies and commitments.
  • Management Projections — Assessment of management-prepared projections and bridging forecast assumptions to the most recent normalized operating results.
  • Coordination of Tax Due Diligence — We partner with experienced tax transaction professionals who provide comprehensive domestic and international tax services for our clients.
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    SELL-SIDE DUE DILIGENCE

    Having experienced due diligence professionals on your sell-side team can speed-up the due diligence process, ensure deal issues are understood before a potential buyer identifies them, and allow management to focus on running the business rather than spend time fulfilling due diligence requests. Our sell-side services are typically used by corporations interested in divesting one of their divisions, or by private equity firms interested in monetizing one of their portfolio companies, or a division thereof.

    Our experience with sell-side transactions allows us to offer the following services to help maximize deal value and support your other deal resources:

  • Data Gathering and Analysis — Preparing analyses to be used in the information memorandum and the due diligence process.
  • Data Room Preparation — Creating and managing the data room during the due diligence process.
  • Business Division Carve outs and Divestitures — Performing analyses of stand-alone costs in a carve-out situation.
  • Diligence Coordination — Coordinating with potential buyers through the diligence process.
  • Assistance with Key Financial Metrics — Defining financial metrics for working capital pegs.
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    BUSINESS ADVISORY

    We understand that full-scope due diligence is not always required. As a result, our flexibility allows us to readily accommodate your requests for special projects. The following examples illustrate the types of special projects for private equity firms, cash flow lenders and corporations:

  • Recurring Revenue Analysis — Underlying revenue streams, like those of software and subscription companies, are contracts. We can help you understand the sustainability of those revenue streams by calculating customer churn.
  • Analysis of Working Capital — Unfavorable post-close working capital adjustments can significantly erode ROI. We can help you define a seasonally adjusted working capital peg.
  • 13-Week Cash Flow Forecast — An unanticipated cash shortfall at a portfolio company can have catastrophic results on your investment. We can help you anticipate the cash needs of your portfolio company.
  • Proof of Revenue — Reported revenue not supported by cash receipts can be an indication of poor financial reporting, which can result in overstated revenue and EBITDA. We can reconcile revenue to cash receipts to help our clients understand the impact of non-cash items on results.
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    PORTFOLIO MONITORING

    We help our clients better understand the changes in the performance of portfolio companies. In addition to being an outsourced alternative, we can also partner with your account officers to identify potential performance issues early in the loan or investment term, before they become a significant concern.

    We tailor the scope and procedures performed during our engagements based on your specific needs and current concerns surrounding each portfolio company. Procedures we perform may include:

  • Assessment of Recent Performance — Performing income statement and balance sheet analyses to understand recent changes in operations and profitability since your initial investment and to alert clients of potential future covenant violations.
  • Budget-to-Actual — Comparing year-to-date budget to actual results.
  • Definition of EBITDA for Covenant Purposes — Analyzing EBITDA used for loan agreement compliance, management bonus payments, or earn-out provisions;
  • Quality of Earnings — Identifying quality of earnings adjustments that might impact current or future EBITDA.
  • Covenant Compliance — Evaluating loan covenant requirements for compliance.
  • Quality of Collateral — Evaluating collateral, including accounts receivable, inventory and fixed assets, on asset-based lending transactions.
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