Case Study

Strengthening Deal Discipline in a Complex Carve-Out Transaction

Kaufman Rossin helped a transportation and logistics company evaluate a complex carve-out acquisition through strategic advisory, financial due diligence, and value-driver analysis.

Company

A transportation and logistics company evaluating the carve-out acquisition of a freight business with significant operational complexity, shared services dependencies, and multiple factors affecting transaction structure and purchase price.

Challenge

As buyers placed greater scrutiny on carve-outs, standalone costs, working capital, and synergy assumptions, the target presented limited transparency into historical performance, future profitability, and standalone economics. Management projections anticipated significant EBITDA growth despite modest revenue gains, making value creation heavily dependent on cost reductions and synergies.

Leadership engaged Kaufman Rossin to validate key assumptions, identify transaction risks, and provide an independent fact base to support valuation and negotiations.

What Our Diagnostic Revealed

EBITDA required further normalization and validation
Standalone assumptions relied heavily on carve-out cost allocations and future operating structure
Information gaps remained across revenue support, bad debt, payables, and fixed assets
Synergy assumptions required additional support before they could be relied upon
Purchase price considerations needed to reflect target-specific risks
Projected value creation depended on assumptions that required further diligence

Solution

Kaufman Rossin combined transaction advisory, financial due diligence, and operational analysis to evaluate the transaction from both value and execution perspectives.

Key elements included:

Reviewing the virtual data room to identify preliminary risks and negotiation considerations
Assessing purchase price drivers through comparable company analysis and target-specific risks
Performing Quality of Earnings analysis, including EBITDA adjustments, insurance normalization, and bad debt assumptions
Evaluating standalone business economics, shared services allocations, intercompany revenue, and post-carve-out SG&A requirements

Analyzing net working capital, accounting policies, and financial reporting quality
Assessing operational factors including capital expenditures, customer profitability, asset utilization, and operating leverage
Identifying diligence priorities related to synergies, restructuring, and business continuity

Impact

Kaufman Rossin provided the client with a clearer, more defensible view of the target's financial performance, carve-out risks, and value drivers, strengthening transaction discipline and negotiation strategy.

Improved transparency into normalized EBITDA and earnings quality
Better visibility into standalone cost structure and carve-out dependencies
Identified key diligence gaps affecting valuation and purchase price
Strengthened evaluation of synergy assumptions and execution risks
Provided a stronger fact base for negotiations, resulting in a lower purchase price based on Quality of Earnings findings

Highlights

Assessed normalized pro forma EBITDA at $141.1 million, compared with management-adjusted EBITDA of $152.3 million—a $11.2 million adjustment that informed a reduction in purchase price
Identified revenue declines after adjusting for certain revenue categories and highlighted key performance trends
Determined that intercompany revenue represented 16.5% of total revenue
Evaluated management initiatives projecting approximately $123 million in EBITDA improvements and third-party synergy estimates of $53 million–$106 million, identifying areas requiring further validation