The Challenge
Pennybacker Capital Management, LLC, through its infrastructure investment arm Pennybacker Critical Infrastructure Partners (PCIP), sought to expand its newly formed infrastructure portfolio. A financial transaction was pursued, wherein PCIP acquired an LNG business segment from an Undisclosed Company, producing 8,300 MMbtu per day of LNG uniquely positioned to deliver LNG solutions across the Southeast and Caribbean.
Due diligence services support was necessary to execute the transaction. Leveraging its extensive transaction due diligence experience and energy industry expertise, Opportune provided due diligence services to assist PCIP in delivering a comprehensive quality of earnings report and help calculate the post-close settlement of the purchase price, including various net working capital analyses. Our ability to provide these services gave PCIP the financial clarity and confidence needed for informed internal decision-making during purchase price negotiation.
The Solution
Prior to the transaction close, Opportune’s transaction advisory team conducted a detailed review of Miami LNG’s carve-out financial statements to ensure completeness, evaluate allocations, and assess cost risks. Once the seller clearly communicated the carve-out methodology of the financial statements, Opportune conducted additional diligence procedures and created a fulsome quality of earnings report documenting accounting policies, EBITDA adjustments, gross margin, capital expenditures, and inventory rollforwards. Through our analysis, we identified issues with the carve-out methodology that ultimately led to a material decrease in valuation and reduction in the purchase price. Our report was made available to PCIP to allow them to understand the assets better and assist them in the underwriting processes.
Additionally, our transaction advisory team performed multiple iterations of net working capital analyses, including line-by-line balance sheet review, assessing aging, normalizing adjustments, etc. After these procedures, a final net working capital report was issued to present to both PCIP and the seller to finalize a post-close purchase price adjustment.
Business Impact
- Successful and timely close of the transaction
- Significant efficiencies and cost savings by using a single firm for quality of earnings and general transaction advisory needs
- Increased bandwidth for newly created critical infrastructure team
- Enhanced investor interest and confidence by leveraging our extensive energy experience to help stakeholders better understand the carve-out financials through Opportune’s due diligence
- Ongoing and well-established relationship with Opportune for long-term growth potential
- Identification of carve-out issues that ultimately led to a reduction in purchase price