Refinancing Diligence for a Private Equity Fund Focused on Technology Businesses
Our Client, a private equity firm targeting both public and private companies with proprietary software or hardware and proprietary intellectual property, called on Riveron to perform financial due diligence for the refinancing of an existing portfolio company. The portfolio company serves aerospace, fabrication and construction markets with ply cutting and laser metrology solutions, offers leading product lifecycle management (PLM), product data management (PDM) and CAD automation solutions, and was private a few years prior. They had a high-cost debt syndicate created to fund the transaction before the capital markets had returned to full health. With the lending market greatly improved, the portfolio company needed a new term loan and revolver financing. They had operated under our client’s ownership for almost one year and had implemented a substantial operational and cost structure overhauls.
Riveron was engaged to provide a detailed Quality of Earnings analysis that included diligence on typical items such as normalized executive compensation, shared service center add-backs and non-recurring consulting and other expenses. We also analyzed purchase price allocations, and proposed adjustments based on our analysis of the portfolio company’s treatment of capitalized internal software development labor costs.
Benefit to our Client
As they were the key to understanding pro forma EBITDA, Riveron also analyzed the pro-forma impact of 28 separate cost savings initiatives that the company had individually adopted and initiated over the trailing twelve month period. This analysis was bifurcated between SG&A initiatives and COGS projects intended to lower ongoing operating costs.