As a rapidly-growing medical nutrition company prepared to acquire a procurement and manufacturing facility, management recognized the need for accurate inventory costing and profitability information to get the deal done. Having this information was critical to the client’s ability to obtain financing to fund the purchase. However, due to changing and overly complex accounting practices and systems at the target, reliable information was difficult to get.
- Inaccurate financial data as a result of a recent improperly implemented accounting system and untrained staff.
- Material year-end audit adjustments resulting in significant changes to reported amounts
- Unburdened overhead costs presented a challenge to determining overall cost absorption during testing periods.
- Unclear product line profitability created issues in determining the cause of declining margins.
With concentrated attention on achieving our client’s strategic objectives and our relationship-based service model, our Transaction Advisory Services
team provided the following critical assistance:
- Conducted target interviews to understand current accounting and inventory processes and discovered opportunities for improvement.
- Identified and reviewed costing pools that when allocated to various product lines resulted in more accurately stated inventory for borrowing base determination.
- Performed a profitability analysis by customer and product to determine pricing differences which in turn led to margin differences.
- Assisted in reviewing target prepared forecasts for reasonableness.
- Assisted with inventory observations and process assessment at the target’s facility.
- Accurate projection model necessary for future financing.
- Vital insights into profitability trends by product and customer.
- Significant inventory adjustment reducing reported balance by approximately 25% avoiding over-paying.
- Accounting and finance process improvements.
"Regardless of the individuals or services, EKS&H always provides us the professional assistance we need. Their experienced transaction team is responsive and knowledgeable, and have been an integral part of the success of our transactions. They consistently offer in-depth insights beyond financial diligence that help us make better-informed decisions."
—Vice President - Corporate Development, Boulder-based Nutrition Company