• A $20 million home medical equipment provider was acquiring the assets of a smaller rival and its senior lender required a third-party assessment of the transaction before committing additional funding.
• Fort Dearborn Partners (FDP) was retained to assess the merits of the proposed transaction and perform limited due diligence over the target.
• Our work consisted of:
– Management interviews of the target company.
– Analyzed the financial impact of the transaction regarding profitability, capital structure and ability to service debt post-transaction.
– Assessed and quantified expected synergies.
– Analyzed sources and uses of cash and expected line of credit availability on Day One.
– Conducted scenario analysis on cost synergies and gross profit margins and its impact on debt service.
– Valued the target company based on expected deal synergies.
• During our review, we also identified deal risks including the ability to retain key personnel post-transaction, collectability of aged accounts receivable and the value of excess or obsolete inventory.