The Buyer was a national ESOP-owned distributor of specialty products with annual revenue above $2 billion.  Customers included widely recognized retailers and a variety of independent stores.

Target was a Canadian distributor with annual revenue of $50 million.  Target distributed refrigerated and frozen value-added meat, poultry, deli products, and other grocery items.

Target had not previously been audited and did not hire an investment banker to represent them.  The Buyer hired FDP to perform the following procedures:

–  Assess Quaity of Earnings including an evaluation of management's EBITDA add-backs;

–  Analysis of customer revenue and profitability;

–  Assess the foreign currency impact on inventory valuation and earnings; 

–  Review sales seasonality, identifying key trends and their impact on working capital and line of credit borrowings;

–  Review cost of goods sold and selling, general and administrative expenses to analyze trends and anomalies; and

–  Analyze working capital balances including movements in reserves, aging, the composition of balances, historical write-offs, and valuation.

FDP provided an assessment of Target's management team and sales operations.

Fort Dearborn initiated negotiations to reduce the purchase price based on material due diligence findings.

Based on Fort Dearborn's findings, the Buyer was able to negotiate a reduced purchase price.  Our material findings included:

–  Identified the one-time sale of a high margin SKU, contributing over $450K to EBITDA;

–  Discovered the value of inventory was overstated through the use of a static foreign exchange rate;

–  Identified certain aged accounts receivable that were not fully collectible; and

–  Identified customer overpayments that required future refunds.