How CFO-level insight garnered one company millions more for their sale price
We can talk about our fractional CFO services… or you can read about the results. See what we did for an area manufacturing company!
Challenge
A hydraulics company that had recently become our client was going out for sale. However, their inventory situation was rife with anomalies, from a lack of physical inventory counts performed to inaccurate inventory valuation reports. This created bizarre margins and costs of sales that were unexplainable, leading to inconsistent financial reporting.
The company put itself up for sale anyway. After securing a signed letter of intent, due diligence went on for the better part of a year — with a great deal of time and money spent trying to explain the unusual numbers and lack of accurate information. Ultimately the sale fell through because the buyer reduced their price too much with all the uncertainty. That’s when the company asked us for help.
Solution
First, we assisted the company in hiring an accounting manager. Together we dove into their inventory system, workflow and processes. We helped them redesign their flow of information to more accurately reflect their inventory situation at any given time, providing better visibility of their operations and abilities.
Then every month, we walked through all inventory process adjustments with the accounting manager, fixing anomalies and helping them understand what was happening and why. We kept up this process until no irregularities were found.
Result
Once our work was done, the company went out once again for sale. This time around, the owners could produce the proper work papers without any issues and went into the process with confidence that their inventory processes were sound.
This second cycle of due diligence was much more successful, taking only five months from the signed letter of intent to finalization of the sale. Not only was the company able to sell more easily, it also fetched a selling price that was 22% higher than the first time around!
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