Sell-Side Due Diligence Helps Ensure Successful Transaction
The owners of Star Seed retained our firm to assist in a majority recapitalization of the company. They wanted to find an investor who could finance future growth initiatives while allowing the owners to maintain executive positions with Star Seed. While we wanted to find a buyer who provided a good strategic fit, we also wanted to ensure the owners received maximum value for their majority stake in the company.
In order to achieve maximum value through a sale, we needed to provide clear communication between our client’s accounting personnel and the buyer through the due diligence process. To gain a thorough understanding of Star Seed’s financial performance, the buyer would need to convert the company’s tax basis financial statements to follow U.S. GAAP. In order for our client to receive a fair price, our team would need to accurately report the company’s earnings under U.S. GAAP. This would require both technical accounting expertise and knowledge of the transaction process.
Our due diligence team provided additional support for Star Seed’s transaction, serving as a liaison between its accounting personnel and the buyer’s deal team. Our due diligence team’s accounting expertise also allowed us to gain a clear understanding of the company’s tax based accounting practices. Additionally, we provided Star Seed with insight into how buyers scrutinize the financial performance of a company during the due diligence process.
We were then able to provide more accurate interim and annual financial statements by reporting financial performance under U.S. GAAP. By conversing Star Seed’s financial statements, the company’s reported EBITDA increased by nearly $800,000. As the buyer reviewed Star Seed’s financial performance and challenged reported earnings, our team was prepared to discuss specific areas of the company’s estimates and non-GAAP financial reporting practices. Being ready to communicate clearly on these issues helped us maintain leverage in negotiations.
Our team also helped increase the value of Star Seed by creating and implementing a thorough physical inventory process to ensure that accurate inventory levels were reported in trailing twelve month financial statements and final working capital.
A majority interest in Star Seed was sold to The Gladstone Companies, Broadgate Capital, and Highline Equity Partners in June of 2013. By working closely with Star Seed’s accounting personnel, our team was able to help the owners realize maximum value for their shares.
About Star Seed
Founded in 1920, Star Seed is a recognized leader in the national seed market. They are a seed producer, conditioner, and distributor and offer over 500 products including several brand name seed varieties.
About The Gladstone Companies
Gladstone is a family of public and private investment funds with $1.2 billion invested in over 250 companies across a broad range of industries. Located in Washington, D.C., they provide financing solutions for private equity sponsors.
About Broadgate Capital
Broadgate is a Dallas, Texas-based private equity firm targeting smaller middle market companies in niche industries with strong growth potential.
About Highline Equity Partners
Based in Denver, Colorado, Highline invests in companies with strong management teams across the U.S. Like Broadgate, they invest in middle-market companies in niche industries.
This document is for informational use only and may be outdated and/or no longer applicable. Nothing in this publication is intended to constitute legal, tax, or investment advice. There is no guarantee that any claims made will come to pass. The information contained herein has been obtained from sources believed to be reliable, but Mariner Capital Advisors does not warrant the accuracy of the information. Consult a financial, tax or legal professional for specific information related to your own situation.