404-625-1348

Growth Services, Acquisition Due Diligence

Description of Client:   Investor Group

Situation as described by Client:  

  • Target company was profitable but in bankruptcy due to mismanagement by recent owner  
  • Founder was CEO
  • During bankruptcy the company had generate significant cash and paid off debts arising during the mismanagement.  

Engaged for:

  • “High Level” consulting engagement consisting of inquiries of personnel and review of documents and accounting records of the target with report of findings and  recommendations 

Situational Appraisal:

  • The CFO was a consultant who joined company around time of bankruptcy
  • The CFO did not have an accounting background
  • The Company’s inventory was complex without adequate internal controls over the bookkeeping
  • Related Companies were included in the proposed acquisition   

Results:

  • Uncovered numerous issues with both the valuation of the inventory as well as the control of the inventory transaction within the books
  • Uncovered customer advances recorded as receipts on sales billed in advance of shipment.
  • Quantified new costs with vendors
  • Due to inadequate controls over inventory, deal was placed on hold until controls resolved. 

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