BRANDLIN AND ASSOCIATES

DUE DILIGENCE CASE STUDIES

Client:	Private Equity Investor & Mezzanine Lender
Company:	Manufacturer of Sporting Goods
Revenue:	$60,000,000
Equity Investment:	$33,200,000
Market Capital:	$35,000,000
Existing Loan:	$12,000,000
New Capital:	$20,000,000

Validated the business case for acquisition and privatization of 2 publicly held distributor / manufacturers.
Completed diligence on both the acquisition and the acquiring portfolio.
Identified non-recurring EBITDA adjustments totaling $2.9 million and EBITDA synergy savings from consolidation of $3.3 million.
Determined acquisition integration timing of EBITDA savings.
Identified asset-based lending constraints associated with the Company's foreign inventory purchases.

Identified understatement in accounts receivable of $400,000.
Researched and documented company's contractual ability to pass-through raw material price increases.
Identified differences in GAAP reporting procedures between company and foreign parent.
Evaluated standard costing systems and valuation differences between foreign and domestic entities.
Commented on due diligence report generated by "Big 4" accounting firm and identified material discrepancies in EBITDA roll-forward computation.
Analyzed the impact of the Puerto Rico tax rate on the overall effective U.S. tax rate for "Newco".

Determined internal controls to be inadequate, resulting in inaccurate interim financial statements.
Discovered an existing senior lien relating to a significant segment of the business and secured by a performance bond. A unique loan structure was required to carve out collateral behind performance bond; otherwise, the existing lien could trump the new senior loan.
Generated 3 years of combined income statements for 3 related companies previously not combined.
Created a combined, trailing 12 months income statement and EBITDA schedule.
Identified inefficient sales bidding process.
Determined current controller incapable of assuming role of CFO.
Discovered potential risks related to accounting software.

Client:	Private Equity Investor
Company:	Professional Cleaning Services Provider
Revenue:	$5,000,000
Equity Investment:	$15,000,000

Conducted pre- acquisition due diligence on behalf of equity investor.
Identified non-recurring EBITDA adjustments totaling $2.3 million.
Identified inadequacy of controls over master franchise fee reporting; suggested cost-effective procedures to minimize exposure of underreported franchise income.
Identified improper deferred revenue reporting and adjusted earnings in accordance with GAAP.
Evaluated proprietary software management system and identified insufficient controls; assessed timing of rollout of future accounting modules.
Evaluated the impact of a qualified stock purchase and possible §338 election.

Consolidated 3 separately reported companies for current year and 2 previous years. Identified and eliminated intercompany transactions.
Re-calculated EBITDA on a consolidated basis.
Scheduled the trailing twelve months P&L for 3 companies, created pro-forma adjustments, determined normalizing entries and re-calculated profit sharing contribution.
Identified internal control issues related to material amounts of sales and cost of sales allocated to improper periods.
Identified other accounting and internal control issues that rendered the interim financial statements unreliable.

Client:	Senior Lender
Company:	Manufacturer and Distributor of Residential and Commercial Doors
Revenue:	$124,000,000
Loan Size:	$10,000,000

Saved company approximately $1,000,000 in tax liability by evaluating the capitalization policy of manufacturing overhead.
Identified benefits of integrating inventory and general ledger software packages.
Created inventory turnover report to manage purchasing efforts and isolate slow moving products.
Assisted management in their search for new outside accountants.

Client:	Mezzanine Lender
Company:	Computer Hardware and Proprietary Software Developer
Revenue:	$118,000,000
Equity Investment:	$20,000,000

Determined accounts receivable reserve understatement of $2,300,000.
Surfaced concerns regarding the lack of knowledge and understanding of the company’s business by the financial personnel.
Uncovered material internal control weaknesses relating to revenue recognition.
Initiated the creation of software programs to capture revenue transactions on a timely and accurate basis.
Developed historical accounts receivable write-offs.
Identified various service provider partners and locations within the US that had higher than normal rate of accounts receivable write-offs.
Created method of estimating bad debt reserve and identifying potential uncollectible accounts receivables.
Implemented procedures and timing guidelines to perform monthly “close” and instituted procedures to analyze each balance sheet account.

Client:	Principal
Company:	Fuel Sales & Convenience Store Operator
Revenue:	$97,000,000
Loan Size:	$7,500,000

Conducted financial due diligence to assist with stock acquisition.
Ascertained inadequacies of EBITDA “add backs” totaling $600,000.
Identified $265,000 of downward adjustments to EBITDA, which resulted in a 38% decrease in the target's purchase price.
Discovered material overstatement in reported inventory balance as much as $38,000.
Prepared pro-forma financial statements.
Identified purchase price adjustments that would impact cash balance and require reimbursement by the seller.
Prepared adjustment schedules to reflect the fair market value of the current lease payments.
Assessed competency of the accounting department.