Case Study – Turnaround of Accounting and Finance Function
November 07 , 2019
Industry: Private Equity
Type of Service: Accounting & Finance Outsourcing
The Board of a Private Equity portfolio company had decided to replace the current CFO, primarily due to its lack of confidence resulting from inaccurate projections and improper accounting treatment. An additional complication was that the company was running out of cash and needed to raise funds quickly, which muddied the issue of hiring a permanent CFO. The company was in the process of raising additional debt and needed the immediate support of a CFO in whom it could have confidence to lead the finance function, to become an effective member of the management team, and to partner with the CEO in the fund-raising process. Concurrently, the Company was also considering divesting a portion of its business.
What We Did:
We “hit the ground running” and immediately commenced working with the CEO and management team to construct a credible business plan and forecast, including both short and longer-term cash flows in order to facilitate effective conversations with the Board and investors/lenders. In addition, we actively participated in the negotiation of successful bridge financing, working closely with legal advisors and the Board. We also created and maintained a data room to facilitate discussions with potential investors or buyers, including responding to multiple due diligence requests, and discussions with potential buyers.
At the same time, we assumed the day-to-day management of the finance/accounting team, and we implemented best practices in terms of cash management and internal controls. Further, we simplified the forecasting process, which resulted in more accurate projections, and we provided accounting policy guidance and confirmed the proper treatment of significant transactions, which had been misstated in prior periods.
Despite its poor performance and prior lack of credibility, the Company was able to negotiate a successful short-term bridge financing, and subsequent financing. It also was able to effectively manage its cash flow to meet the forecast on which the financing was based. The credibility with the Board was restored. The key accounting staff were retained during this challenging period and we exceeded the original objectives of the engagement, which contributed to the Company extending the engagement from the originally estimated 3-4 months to a full year.