A privately owned hedge fund sponsor and private equity firm (the “Company”) invests in the public equity, fixed income, and alternative investment markets across the globe. It employs multiple strategies, including various equity and credit-driven strategies to create its investment portfolio. The firm employs a combination of fundamental and quantitative analysis to make its investments, including private equity investments.

READ MORE: The Importance Of A Quality Of Earnings Report In M&A Transactions

Opportune professionals were engaged by the Company to provide professional services related to the client’s evaluation of potential financing involving a solar panel provider (“the Target”) that operates across multiple states nationwide. The solar panel company specializes in providing solar panels to lower-to-middle income customers at little to no cost to the customer through the use of tax incentives. As a result of using tax incentives, the corporate structure of the solar panel company was quite complex and required input from Opportune’s team of specialized tax professionals.

Opportune professionals performed comprehensive quality of earnings review procedures, including:

• Preparation of consolidated financials across the complex structure of the Target, an analysis which had not previously been performed.
• Analysis of normalized run rate for earnings and cash flow.
• Assessment of the existence of overstated assets and understated liabilities.
• Evaluation of the Target’s tax structure and potential impacts on future earnings or cash flows.
• Review of a sample of common contracts between Target and the residential homeowner receiving solar panels.
• Evaluation of cash management procedures and traced bank account activity to operating revenues and expenses.
• Analysis of tax equity partnerships and their ownership structure, including flip options and dates.
• Review of working capital and the potential impacts of working capital on the proposed transaction.

Opportune added value to the client by providing a detailed report and supporting a financial model covering the results of our findings with sufficient information to make an investment decision. Ultimately, the Company elected to go forward with an equity investment in the Target.

Leveraging our Complex Financial Reporting and Tax practices, Opportune’s team of seasoned former Big 4 auditors and energy experts bring the experience and tools necessary to evaluate the stability and persistence of a company’s earnings. When assessing the quality of an entity’s earnings, we consider the accounting practices, internal control environment, management experience, capacity to deliver on growth projections, macroeconomic influences, and cash flow stability. For more information on how we bring value to the quality of earnings analysis and services, CLICK HERE.