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An investment banking firm was about to acquire two divisions of a publicly traded firm for $120,000,000. One week before the closing, the financial model they spent months building to justify the investment did not work. This meant they could not demonstrate to their two lenders that the deal would generate the cash and profits required to meet the payment schedule & repay the loans as planned.
The model had to meet 2 different sets of criteria; 1 for the term lender & a different set for the lender providing the revolving line of credit.
Solution
I sat down with the CFO to understand what the model was supposed to do. We examined the model together to understand how he thought it should work compared to how it did work; or didn't. I sat down & went through the entire model to see how the structure worked. I was then able to trace and repair the broken links, checked and corrected formulas that had been written incorrectly, and then fully tested the model.
The model had to meet I had to make sure it was accurate from both the lender’s point of view as well as the client’s.
Result
The model was functional and successfully fixed in less than four days. The transaction closed on time, thus saving the client $1,000,000 in penalties and tremendous investment losses had they forfeited the entire deal, as well as enabling all potential future earnings from the transaction.
