The Buyer was a private equity firm focused on investing in middle-market food, beverage, and ingredient companies.

The Seller/Target was a leading supplier of locally sourced raw honey to national and regional grocery stores and grocery club chains across the United States.

Target offers 23 different honey varieties and generates roughly $50 million in revenue with strong growth projections.

Engagement Overview

FDP was engaged to perform a limited, high-level review of the Target's Quality of Earnings report, confidential information memorandum, and data room information to identify any preliminary accounting issues or risk areas for further consideration and analysis.

FDP read and analyzed external accountant/auditor reports for the last 5 years, including management letters and past adjustment schedules to determine additional potential EBITDA adjustments.

FDP also analyzed management EBITDA add-backs and judgmentally determined roughly $800 thousand (approximately 10% of EBITDA) of the add-backs were recurring expenses and should be removed from adjusted EBITDA.

FDP assisted the Buyer in determining the Working Capital Target as part of the Asset Purchase Agreement and offer.

Results

As a result of FDP’s findings while performing the transaction due diligence, the Buyer proposed an aggressive purchase price in line with realistic EBITDA expectations.

The Transaction was aggressively pursued by other parties and, ultimately, our client did not provide the highest price for the Target.

While the transaction was not ultimately consummated, the private equity firm avoided potentially overpaying to acquire the Target.