Strategy case study

How one organization prioritized best-fit deals in the healthcare industry

The issue: A private equity client needed help with their proposed acquisition of a large multi-national business. The target business was to be carved-out of a larger parent company and was being sold in a competitive auction process.

Our approach: We deployed a cross-border, cross-functional team of financial, tax, human resources, IT/operations and risk management specialists in the US and overseas to conduct due diligence. We helped the client better understand the sustainability of historical earnings in each of the target's four business divisions and the key drivers of revenue and profitability. By leveraging our industry experience, our operations team also helped our client understand the significant one-time costs which would be incurred with respect to the carve-out of the target as a stand-alone entity and our financial due diligence and human resources teams also analyzed incremental stand-alone costs compared to the historical allocations charged to the business by the parent company. We also assisted our client in identifying other assets/liabilities to be considered from a valuation perspective. Our tax team helped the client with structuring the transaction and due diligence from a federal, state and local tax perspective, recommending a transfer pricing study be performed.

The outcome: Our client won the bid. We helped our client receive a 2% reduction in purchase price through both due diligence, where we advised that appropriate consideration be given to the seasonality of the target's working capital requirements, and after closing during their negotiations of the purchase price adjustment.

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