Stout provided sell-side due diligence services for a national automotive aftermarket parts supplier. The company was historically comprised of three separate, distinct businesses in the western United States.

Stout’s Due Diligence team prepared a quality-of-earnings (QofE) analysis for the three separate businesses, each with a unique management team, IT system, and financial records. Additionally, Stout combined the three analyses in a QofE report, which was provided to buyers and included additional analysis around the go-forward structure of the combined company. Historically, the company had limited accounting and finance expertise, so the Due Diligence team heavily supported the company throughout the transaction.

Stout provided data visualization strategy and portfolio analytics services for a leading middle-market private equity firm. The firm was looking for ways to better manage large amounts of complex data to identify trends and issues impacting performance across the portfolio. Stout developed the strategy for data visualization and the underlying technology architecture to manage the collection, aggregation, and analyses to be visualized.

The Stout team integrated data across enterprise resource planning and customer relationship management platforms, HR and payroll systems, publicly available third-party data sources from government agencies, and industry-specific platforms, including real estate fund management and mapping software.

The dashboards resulted in a single source of truth that fund managers could visualize in a single portal, which contained static, dynamic, and real-time performance metrics on a consolidated and individual company basis. Dynamic data models enabled managers to self-service additional queries and conduct “what-if” analyses for each industry vertical, enabling the manager to take control of the platform and forecast.

Stout provided risk advisory services to a biotechnology company. We worked with the company to help management gain comfort over financial statement accuracy and mitigate risks under an extremely compressed timeline of less than four months. We remediated the company’s material weakness in its internal controls by implementing a proper controls environment for a publicly traded company.

The team led process walkthroughs for in-scope financial statement processes with key stakeholders to understand and document the internal controls performed by the company’s employees. The team documented the controls in a Risk and Control Matrix and identified key risks that were not mitigated by controls to provide actionable recommendations to management to remediate the findings.

Additionally, the team performed testing at various stages, including interim, roll-forward, and year-end, to ensure controls were designed appropriately and operating effectively. The team collaborated with management to develop a remediation plan for any control deficiencies discovered during testing. The plan outlined the necessary steps to enhance or establish controls that were ineffective, ensuring that the company could better mitigate risks of financial misstatements.

Once the remediation plan was in place, the team conducted further testing to ensure that the remediation efforts were effective in addressing control deficiencies.

Lastly, the team provided a detailed memo or report summarizing all the work performed throughout the year. This document outlined the findings, control assessments, remediation efforts, and any other relevant information to provide a comprehensive overview of the company’s Sarbanes-Oxley Act compliance status to management and the external auditors.

Stout was retained on behalf of a large financial services company in patent litigation involving mobile check deposit technology that had been filed against it by another large financial services company. Patents had been asserted against our client in two separate cases, and our work was focused on the second of the two cases.

Our work included the issuance of multiple reports addressing damages (assuming liability was found) as well as rebutting the other side’s damages claim. Eventually, the case went to trial in Marshall, Texas, in mid-September 2022. Leading up to the trial, the other side had been involved in three prior jury trials in Marshall related to its mobile check deposit technology, with those juries awarding it $200 million, $102 million, and $218.45 million, respectively.

At the September 2022 trial, the plaintiff’s expert asked for damages of $80.5 million covering a period of approximately 14 months, and Stout's Julie Davis testified that damages instead should be a lump sum of $4.3 million for the life of the patents. The jury returned a verdict finding that our client had infringed the asserted patents but awarded damages in the amount that Ms. Davis had opined: $4.3 million for the life of the patents.

This case demonstrates our team’s expertise in working with counsel to develop, defend, and present damages opinions in a manner that resonates with juries.

Stout served as the exclusive sell-side financial advisor to Examinetics, Inc., a portfolio company of Freedom 3 Capital, in connection with its sale to Coalesce Capital.

Based in Overland Park, KS, Examinetics is a leading national provider of workforce health solutions through mobile and on-demand technology across a wide range of industries. The company offers a comprehensive suite of occupational health testing and compliance services to more than 3,000 clients, including many blue-chip, Fortune 500 companies, at approximately 18,000 client locations across the United States annually.

Freedom 3 is a private investment firm based in New York that invests in North American middle-market companies across a range of sectors with a focus on family- and entrepreneur-owned businesses. The firm’s investment process provides it with the flexibility to tailor investment and capital structures to a company’s unique characteristics, industry dynamics, and the management team’s and owners’ long-term business objectives.

Stout provided portfolio valuation advisory services to an SEC-registered investment advisor that provides direct lending solutions for small to middle market companies. We delivered valuation analyses that were critical to meeting the advisor's financial reporting requirements.

The advisor is a leading global alternative asset manager specializing in originating and providing credit financing solutions to facilitate the growth, acquisitions, refinancings, and recapitalizations of small and medium-size enterprises. With over $7 billion of capital invested in over 500 companies, the advisor provides small and medium-size enterprises with term loans, asset-based lending, invoice factoring, trade finance, equipment financing, and treasury management. Since its inception, the firm has provided working capital to the business-to-business, manufacturing, service, and distribution industries.

Stout works with the advisor on a quarterly basis to provide independent, third-party valuations for financial reporting purposes. As part of the ongoing engagement, Stout values approximately 40 different companies and nearly 100 securities ranging from senior secured term loans to warrants worth more than $2 billion.

Stout has advised BDO USA (BDO) on the establishment of an employee stock ownership plan (ESOP). Stout served as the exclusive financial advisor to BDO and led the ESOP structuring, financing process, and execution on behalf of the company. Stout also served as the sole debt placement agent on a term loan financing led by Apollo-managed funds to facilitate the ESOP. The transaction closed on August 31.

BDO is now among the largest ESOPs in the country and is the first large public accounting firm to transition to ESOP ownership.

Background
The Accounting & Reporting Advisory (ARA) team, consisting of Elizabeth Kettler and Logan Busch, was engaged to assist with the accounting and reporting work for multiple private equity funds that were consolidated into an SEC registrant.

Procedures
The ARA team assisted the registrant’s Financial Reporting group with the quarterly financial statement close process (FSCP) to prepare a balance sheet, income statement, investor summary report, and other supporting documentation for various private equity funds.

As part of the quarterly process, the team developed a calendar to organize the close responsibilities allocated to our team in the FSCP process. These included reviewing journal entries and workbooks prepared by a senior accountant summarizing the activity that occurred in each of the funds during the quarter, as well as performing a check to make sure all entries posted to the general ledger were complete and accurate.

After the completion of the close process, our team reviewed the fund financial workbook that the client’s senior accountant prepared. The workbook included a balance sheet and income statement for each of the funds.

Additionally, our team prepared internal rate of return (IRR) calculation workbooks for each fund along with investor summary reports that provide an update on the performance of the funds for each investor. Lastly, we assisted management with the documentation of various workpapers to satisfy key Sarbanes–Oxley controls related to the firm investment valuation process.

Stout was retained to offer opinions on damages resulting from Cook Medical’s infringement of patents owned by Boston Scientific relating to hemostatic clips that are used to stop internal bleeding.

As part of a seven-day trial in Federal Court in Indianapolis (U.S. District Court for the Southern District of Indiana), John Bone, a Managing Director in Stout’s Intellectual Property practice, offered expert witness testimony on damages on behalf of Boston Scientific.

After having heard all the evidence, the jury found that Boston Scientific had proven that Cook infringed two patents related to the “novel design” for hemostatic clips that utilize reversibly operable clip arms and locking mechanisms to stop internal bleeding in a patient’s gastrointestinal tract. Boston Scientific claimed that Cook’s Instinct and Instinct Plus endoscopic hemoclips infringed the patents-in-suit and that Cook had been selling the clips since at least 2013.

Despite hearing opposing expert witness testimony on damages, the jury awarded exactly the damages that Mr. Bone said were appropriate: $142 million in lost profits that BSC would otherwise have made absent the infringement, plus $12 million in reasonable royalties on additional sales made by Cook that did not result in lost sales by BSC.

A platform company (the “Buyer”) of a NYSE-listed investment fund (“Parent”) with revenues of approximately $2.5 billion purchased a set of businesses (the “Target”) from another private equity firm (the “Seller”). The purchase price was roughly $1 billion. The Buyer and Target operated on different systems, different jurisdictions, and differing levels of sophistication within their finance functions. The Buyer and Seller signed a TSA to run for up to 18 months across primarily accounting, finance, and IT.

The Buyer had never taken on an acquisition of that size. The Buyer performed SEC reporting, as it was a significant holding of the Parent. The Target had no SEC reporting capability and did not close its books on an adequate cadence.

Stout proposed finance function integration services to prepare for Day One and Day 100. Among services proposed and delivered are the following:

• Finance integration management office
• TSA management and exit-planning
• Financial reporting readiness
• Management reporting rationalization
• Net working capital and cash flow forecasting
• Partial-year budget build for incoming entities
• SOX readiness assessment of incoming entities
• Opening balance sheet and acquisition accounting memos
• Inventory costing policy alignment
• Revenue recognition, leases, and other significant policy alignment

Stout quickly won the trust of the client by demonstrating a deep understanding of finance function integration and showcasing a team with deep experience both within both industry and professional services. We continue to work with the Buyer and Parent as a long-term integration partner.

Stout advised a western-U.S. automotive collision parts distributor, National Auto Parts, in its recent successful sale to Palladium Equity Partners (along with its joint venture affiliate Palladium Heritage) to create a combined platform named Collision Auto Parts. In addition to providing investment banking services, Stout deployed expert capabilities in financial due diligence and finance integration.

Founded in 1997 in New Mexico, the founder/family-owned distributor expanded throughout California in 2005 as additional family members and operators joined the business. Prior to the transaction, the distributor operated as three fully separate entities with independent operations, management teams, and financial reporting functions. During the marketing process, Stout successfully positioned the entities as a single, multi-unit, geographically diverse business with significant cost savings and revenue synergies to be realized if fully merged.

Stout provided an integrated set of transaction-related services to prepare for and execute the sale:

Due Diligence
At the outset of the engagement, Stout’s Due Diligence team prepared the sell-side quality-of-earnings (QofE) report. During the QofE, an inconsistent application of internal accounting policies was identified in some areas of the business, prompting the Due Diligence team to prepare a separate QoE for each entity, along with a consolidating report, which the deal team leveraged as they went to market in June 2022.

Finance Integration
Stout’s Finance Integration group then assisted National Auto Parts by preparing its first set of historical financial statements under U.S. Generally Accepted Accounting Principles. In addition, Stout furnished detailed supporting workpapers, including reconciliations of the financial statements to each entity’s internal reporting and transaction systems. The Finance Integration team also dedicated substantial resources to supporting the distributor and the deal team through a second, and ultimately successful, buy-side QoE process.

Investment Banking & Restructuring
Stout’s Investment Banking team leveraged its knowledge of the collision parts distribution segment to secure the mandate and position the distributor to buyers as a prime opportunity to create a platform uniquely poised to capture the entire western-U.S. market. Stout has now completed two of the top three private equity-backed platform sales in the collision parts segment.

What the Client Has to Say:
“Prior to our successful sale, Stout was able to identify and execute an integration path that established National Auto Parts as one of the largest, scalable collision repair parts platforms in the Western U.S. Three coordinated teams from Stout helped us effectively integrate and establish the back-end accounting, finance, and corporate development functions required to execute our M&A strategy. With Stout’s guidance and our new partnership with Palladium, we now have the finance operations infrastructure in place to pursue a focused growth strategy of completing more acquisitions and adding new locations to continue to provide superior availability and service to our customers.”
- Ray Tsai, Chief Executive Officer at Collision Auto Parts

Stout performed Step II long-lived asset impairment testing procedures under U.S. GAAP for a specific facility of the commercial truck division of a Japanese-owned multinational automotive manufacturer.

The work included identification of the asset group to be tested; an inspection of a manufacturing facility larger than 500,000 square feet; utilization of both the market and cost approaches to value; estimation of the fair value of the personal property, real property, and right-of-use assets of the facility; and calculation of the overall impairment charge to be recorded.

Stout’s analysis was successfully reviewed by a national audit practice, and Stout was able to assist the client accurately and efficiently with its financial reporting requirements.

Stout was retained by Planmeca, a Finnish manufacturer of high-tech dental 3D-imaging devices, to analyze and testify to a reasonable royalty that would provide adequate compensation to Osseo Imaging LLC if a trier of fact determined that certain Planmeca ProMax 3D-imaging systems infringed patents held by Osseo. Osseo, the patent holder and plaintiff in the case, claimed that as a result of the alleged infringement, Planmeca should pay a royalty rate of over $5,000 per system, which would have amounted to over $20 million in reasonable royalty damages (and up to $60 million if a jury found Planmeca’s infringement to be willful).

A one-week trial was held in Delaware Federal court, where John Bone, a Managing Director with Stout, testified as the damages expert on behalf of Planmeca. Mr. Bone testified that the plaintiff’s royalty model was flawed and that even if the plaintiff’s royalty approach was appropriate, the reasonable royalty could not be more than approximately $1,000 per device if certain corrections to their model were made, which would amount to reasonable royalties of no more than approximately $3.9 million. Mr. Bone also testified that a more proper approach to determining the reasonable royalty would have amounted to a reasonable royalty of $200 per device, which would amount to reasonable royalties of approximately $700,000.

After hearing all of the evidence and testimony that were presented during the course of the trial, the jury found that Planmeca infringed the Osseo’s patents but only awarded $2.3 million in damages, which was the midpoint of the two royalty estimates that Mr. Bone testified to at trial. Mr. Bone was assisted by Candice Cornelius and Maureen Tracey from Stout.

Stout served as exclusive financial advisor to Care and Help Home Care, LLC in connection with its sale to HouseWorks Holdings, LLC, a portfolio company of InTandem Capital Partners. InTandem is a New York City-based private equity firm that invests in and helps accelerate the growth of small to mid-sized companies in select healthcare services sectors.

Founded in 2017 and headquartered in Huntingdon Valley, PA, Care and Help provides non-medical home care primarily consisting of personal assistance services, such as bathing, grooming, light housekeeping, and meal preparation. Care and Help also offers hot and specialty meal deliveries through its Meals on Wheels program. The Company has a network of over 1,650 caregivers in Pennsylvania and operates four locations throughout the greater Philadelphia area, all of which are within proximity to densely populated regions of Medicaid patients.