Virtas Partners was engaged by a Private Equity firm to re-state historical financial information and analyze performance improvement opportunities at a $200M acquisition target.
Client Background
Our Private Equity firm client had signed a letter of intent for the purchase of a $200M food packaging company and was in the process of performing confirmatory due diligence. An advisor had been hired by our client to prepare a quality of earnings report but the advisor was unable to complete its procedures due to accounting irregularities at the target company and inability of the target’s accounting staff to provide sufficient answers to due diligence requests.
The PE firm also suspected there were operational issues impacting certain irregularities. The firm needed an advisor that could identify and explain the source of the accounting irregularities, assist management in preparing answers to certain due diligence requests and identify operational issues and re-state the historical financial information in order to complete its due diligence.
Scope of Services
- Investigated the source of the known accounting irregularities and searched for and identified additional accounting errors through review of detailed accounting records and supporting documentation
- Reviewed the operations of the warehouses and identified improvement opportunities
- Assisted Management with accumulation and analysis of local accounting data, satisfying various due diligence requests
- Prepared restated historical financial statements reflecting corrections of the accounting errors
- Worked extensively with the company’s Vice President to analyze the impact to purchase price and complete confirmatory due diligence
Significant Milestones
- Identified source of the accounting irregularity and attributed it to operational issues within first week of engagement
- Reported operational improvement opportunities enabling significant value creation post acquisition
- Completion of database, taking historical trial balance and detailed financial statements and adjusting for all errors identified
- Delivery of report and data book, including account-by-account analysis, pro-forma adjustment and financial statement bridges
Value to Client
- Resolution and correction of accounting irregularities
- Clear understanding of financial results
- Ability to complete due diligence
- Identification of value creation opportunities