Mergers, Acquisitions and Corporate Restructuring Case Studies
Finance5 Case StudiesUpdated Sep 2026
Restructuring and combination work tends to produce the same problem: numbers that were meant to move cleanly from one entity to another stop agreeing. The five cases below come from the post-closing and restructuring stages of deals, where a finance team inherits ledgers, forecasts, and documents it did not build. Each follows one situation from first signal to settled outcome. The analysis in each concentrates on the records, the exposure they reveal, the control evidence, and the thresholds that decide whether to act, escalate, or hold. Organizations and people are fictional, but the decision structures carry over into practice.
Case Study 1
Acquired ledgers that stopped agreeing after system migration
Halvard Industrial Supply: a regional distributor of pipe fittings and valves, recently acquired by a holding group and moving its accounts onto the parent's system.
The situation
Halvard Industrial Supply came into the holding group with its own ledger, a separate accounts payable subledger, and a vendor statement process run by branch managers. Eleven weeks after cutover to the parent's system, the controller began reconciling the acquired entity's balances against the parent. The two sides differed by 412,800 dollars. Some of it was timing, but a large share came from invoices posted twice, once in the legacy system and once through a manual upload. Statements from the three largest suppliers agreed with neither ledger. The migration had been signed off on a summary balance check that passed, so no one had tested at transaction level until the variance surfaced.
The challenge
The controller had to decide how far to trace before the holding group's close. Fourteen working days remained before the consolidated statements were due to the audit committee. The branch managers disputed whether the duplicate invoices were real, and the migration vendor had kept only summary logs. The team needed to separate true double payments from duplicate records, establish which ledger was authoritative for each vendor, and decide what amount could be carried as a known difference without misstating the close.
Analysis
Teams grounded in Mergers, Acquisitions and Corporate Restructuring usually begin by asking which record is the source of truth for each balance, not which total is closest. Here the parent ledger, the legacy subledger, and the supplier statements each told a different story, and each had its own evidentiary weight. The 412,800 dollars was not one number to explain but a set of items to classify. The controller set a threshold: any item over 5,000 dollars required transaction-level support, and anything under that could be aggregated in a reconciling schedule with a named owner. That split kept the work bounded and made the exposure visible.
Control evidence was thin where it mattered. The migration sign-off relied on a balance check, which confirms that totals match but says nothing about whether an invoice exists twice. The team pulled the migration log and the approval trail for every manual entry. Of 318 manual uploads, 41 had no approver recorded. That was the most serious finding, because it pointed to a gap in authorization rather than a keying error. Exposure was real: an unrecorded double payment could sit in accounts payable until a vendor noticed. The controller escalated the approval gap to the audit committee while the amount question stayed open.
Actions taken
- Freeze manual uploads to the payables subledger until every upload carries a named approver and a matching source document reference. Reopen them only through the approval workflow once that is in place.
- Build a transaction-level reconciliation for each vendor over 5,000 dollars, comparing invoice numbers, amounts, and posting dates across the legacy and parent ledgers. Assign each vendor a named owner.
- Require supplier statement reconciliation at each month end for the three largest vendors, with differences logged in a shared schedule and cleared or escalated within ten working days.
- Set a standing rule that any unreconciled item older than one close cycle goes to the controller with a written explanation, and that the balance-only sign-off is never used alone.
Results
Of the 412,800 dollars, the team traced 287,350 dollars to duplicate postings across 27 invoices and cleared 61,200 dollars as timing. The remainder sat in items under the 5,000 dollar threshold, aggregated into a schedule with named owners. Two duplicate payments had already left the bank and were recovered through vendor credit notes. The controller presented the approval gap and the reconciliation schedule to the audit committee and the committee accepted a control design requiring dual approval on all manual uploads and a monthly transaction-level reconciliation for two quarters after cutover.
Questions for discussion
- Which record should have been fixed as the source of truth for each vendor before the migration started, and who should have made that call?
- How should the 5,000 dollar testing threshold change if duplicate postings clustered in a few high-volume vendors?
- What evidence would you need before accepting a timing explanation for an item that is older than one close cycle?
Case Study 2
Carve-out cash forecast falling short after customers moved volume
Ferrowen Coatings: a mid-sized maker of industrial coatings, carved out of a larger chemicals group and now running as a standalone business.
The situation
Ferrowen Coatings was carved out of its parent with a three-year plan built on volume commitments the parent had negotiated internally. Early in the first full year as a standalone company, two anchor customers moved a fifth of their orders to another supplier, and the raw material contract was reset at a higher price band. Quarterly revenue came in 9 percent below plan, and operating cash flow fell short of the lender covenant trigger. Management had 40 days before the covenant test date and a board meeting in which the sponsor expected a revised plan. The finance team had a forecast model, but its assumptions had been inherited from the parent and never tested against standalone cost structure.
The challenge
The question was not whether the year would miss plan, which was already clear. The team needed a forecast the board could defend, one that separated the volume loss that might return from the structural cost increase that would not, and that showed how much headroom remained against the covenant under each case. Two of the assumptions carried the most weight: the recovery rate on the lost orders and the pass-through of raw material costs to customers. Neither had historical evidence in a standalone setting.
Analysis
The team built three scenarios on a single shared model rather than separate spreadsheets, so every change to an assumption flowed through to covenant headroom. The base case assumed recovery of half the lost orders within two quarters. The downside assumed no recovery and a further 3 percent price pressure from the remaining customers. A severe case combined that with a 6 percent drop in plant utilization. The most useful output was not the revenue line but the headroom line: under the downside the minimum liquidity buffer fell below the threshold the lender had set at 6,500,000 dollars, which turned a planning problem into an approval question.
Testing assumptions meant checking each against evidence the business could observe. The recovery rate was tested against order patterns from the first 11 weeks, which showed the lost volume concentrated in one product family. That made half recovery look optimistic, so the team cut it to a third. The pass-through assumption was tested against the 14 contracts up for renewal, of which only 5 contained index-linked pricing. Decision thresholds were fixed beforehand: if liquidity headroom fell below 1,500,000 dollars in any month, the business would start a cost action plan and open talks with the lender. Below 800,000 dollars, it would seek a waiver before the test date.
- 1Revised base caseRecovery cut to one third and pass-through limited to indexed contracts.
- 2Monthly headroom checkHeadroom compared with the 1,500,000 dollar trigger at each month end.
- 3Cost action planDiscretionary spend paused and two plant shifts consolidated.
- 4Early lender contactWaiver request opened before the test date if headroom keeps falling.
- 5Board approvalRevised plan approved with named owners and dated milestones.
Actions taken
- Rebuild the base case from standalone cost data and order history, dropping any inherited parent assumption that cannot be traced to a current contract or invoice.
- Run every scenario through one shared model so that a change to recovery or pass-through updates covenant headroom automatically, and log each change with its source.
- Fix the headroom thresholds and their responses in writing before the board meets, including who acts, within how many days, and which lender conversation comes first.
- Pause discretionary spend and expansion projects immediately, and report weekly cash against the revised forecast until headroom has stayed above the trigger for two consecutive month ends.
Results
The revised forecast showed covenant headroom staying above the 1,500,000 dollar trigger in the base and partial recovery cases and dipping below it in the downside for two months. The board received the range, not a single number, with actions tied to each threshold. The board approved a cost action plan that reduced fixed spend by 2,300,000 dollars a year and paused a planned expansion. The lender agreed to the waiver request filed in the third week before the test date. By the end of the quarter, the recovery rate was tracking near the revised one third assumption.
Questions for discussion
- Which of the three assumptions would you test first with one week before the board meeting, and what would you accept as evidence?
- At what headroom level would you move from monitoring to requesting a waiver, and how would you justify that level to the lender?
- How should a carve-out team decide whether inherited parent forecasts still belong in the base case?
Case Study 3
Related party payments surface during a freight acquisition review
Oakhurst Freight Services: a regional freight broker with nine offices and contracted carriers, under negotiation for a majority stake by a private fund.
The situation
A private fund was negotiating a majority stake in Oakhurst Freight Services, a regional freight broker that paid most of its carriers on short terms. During confirmatory diligence, the fund's analysts ran a payment review over the prior 30 months and found 212 payments to three carrier companies that were not in the vendor master file. The payments totaled 1,840,000 dollars. Two of the carriers shared a registered address with a former director, and several invoices lacked proof of delivery. The seller's management attributed the payments to an informal arrangement for overflow capacity. The purchase agreement was scheduled for signing in the sixth week, and the fund's financing had a condition tied to clean financial statements.
The challenge
The deal team had to decide whether these payments were a commercial quirk, a related-party issue requiring disclosure, or a possible financial crime indicator requiring escalation under the fund's compliance procedures. Each path carried different obligations and timelines. The fund's compliance lead Imogen needed evidence fast enough to inform the signing decision without making a finding the record could not support.
Analysis
The first test was whether the exposure was contained. The 1,840,000 dollars was about 6 percent of trailing revenue, material but not disqualifying on its face. The larger problem was documentation. The payments had no onboarding files, no insurance certificates, and no signed rate confirmations, so the business could not show what it had bought. The team traced cash from the operating account to the three carriers and confirmed that bank records matched the ledger. That showed the money moved, not that the freight moved. A compliance reviewer would read a gap of this kind as a warning sign whatever explanation came with it.
Escalation turned on thresholds written into the fund's compliance procedures before signing. Any unexplained payment above 250,000 dollars, or any pattern of payments to parties sharing an address with a former insider, required the compliance lead to open a file and notify the investment committee within two business days. Both conditions applied here. The fund did not have to prove a crime, only that the indicators met the documented trigger. The team asked whether the purchase agreement gave protection if the explanation failed, and recommended an indemnity for the 1,840,000 dollars, a closing condition requiring carrier contracts, and a reconciliation of the 212 payments to delivery records before signing.
- Day onePayment register pulled and 212 unmatched payments flagged.
- Week twoAddress match links two carriers to a former director.
- Week threeCompliance lead opens file under the documented trigger.
- Week fourSeller asked in writing for carrier contracts and delivery proof.
- Before signingSpecific indemnity and closing condition agreed in purchase terms.
Actions taken
- Reconcile every payment in the flagged set to a contract, delivery record, and bank trail before the signing date, and label each item supported, unsupported, or unresolved.
- Match counterparty addresses, bank accounts, and officers against the employee and former director registers, and document every overlap even where the explanation seems benign.
- Write the indemnity, escrow, and closing conditions to match the unsupported amount, and tie release of the escrow to delivery evidence rather than to the passage of time alone.
- Log the escalation with dates, decisions, and the rule that triggered it, then keep the file open through one full audit cycle under the new owner.
Results
The seller produced signed contracts for two of the three carriers within the period allowed, and delivery records for 149 of the 212 payments. The remaining 63 payments, totaling 410,000 dollars, had no supporting evidence, and the third carrier's address was confirmed as a mailbox. The compliance lead recorded the matter as an unresolved indicator, not a finding. The fund signed on the revised terms: a specific indemnity covering the unsupported amount, an escrow holdback of 600,000 dollars for 18 months, and a condition that the former director have no role in carrier onboarding after closing. The file remained open through the first audit cycle under the new owner.
Questions for discussion
- Which evidence would have moved the compliance lead from treating these payments as an indicator to treating them as a finding?
- How should the escrow amount be sized when the unsupported total is known but the underlying services are still uncertain?
- When a seller's explanation is plausible but undocumented, what should a buyer require before signing rather than after?
Case Study 4
Bridge facility request for a packaging bolt-on acquisition
Calder Packaging Group: a family-owned maker of corrugated boxes with four plants, seeking financing for a bolt-on purchase.
The situation
Calder Packaging Group asked Northvale Credit Partners for a bridge facility of 14,000,000 dollars to acquire a smaller rival, Ransome Box Works, and fund integration costs over the next year. Calder's trailing EBITDA was 9,200,000 dollars on revenue of 118,000,000 dollars. Its existing senior term loan carried a leverage covenant of 3.5 times, and the proposed financing would take total debt to 4.9 times on a pro forma basis if the target's earnings were included at the seller's figures. The target reported 6,100,000 dollars of EBITDA, but it had lost a large customer last year and its last two quarters were not audited. The family owners wanted a decision within a month since the seller had a rival bidder.
The challenge
Northvale's credit committee needed to decide whether the financing fit the lender's mandate, whether the combined business could service the debt through a downside year, and what conditions would make approval acceptable. The memo draft relied almost entirely on the seller's projections for the target. Rejecting the request would lose the relationship with a family that had backed three prior deals. Approving without conditions would put the lender's senior position at risk if the target's earnings did not hold.
Analysis
The financial evidence needed a haircut before it could support a credit view. Audited figures covered the first two quarters and the rest came from unaudited management accounts. The team rebuilt EBITDA from bank statements and customer invoices. Revenue from the lost customer appeared in the reported figures through a wind-down period, and removing it left adjusted EBITDA at 4,500,000 dollars, not 6,100,000. Three downside cases followed: a flat year, one more lost customer, and a 12 percent input cost rise that could not be passed on. In the last case, leverage rose above 6 times and interest cover fell below 1.5 times.
Suitability depended on what the lender could control if the downside arrived. The facility was a bridge, so repayment depended on selling a non-core plant or on a refinancing not yet arranged. Neither source was certain, so the team set out the conditions for approval in advance. Approval required audited accounts for the target's full prior year, a quality of earnings review that reconciled EBITDA to bank data, a minimum liquidity covenant of 2,000,000 dollars, and a committed take-out plan with a named lender. Rejection followed if the seller refused a customer-level revenue schedule, since that was the control evidence the team needed most.
Actions taken
- Rebuild the target's EBITDA from bank statements and invoices, then remove revenue from customers in wind-down before setting the base case for leverage and covenant tests.
- Size the facility to the downside case that keeps interest cover above 1.5 times, not the base case, and reduce the amount until that test is met.
- Make the audited prior year, the quality of earnings review, and the customer-level revenue schedule conditions precedent to the first drawdown, with no waiver authority delegated.
- Require a signed term sheet from the take-out lender before funding, and set a monthly liquidity test with a defined cure period and a right to stop further draws.
Results
Northvale approved a reduced facility of 9,500,000 dollars rather than the 14,000,000 dollars requested, conditional on audited prior year accounts and a quality of earnings review that confirmed EBITDA above 5,000,000 dollars. The minimum liquidity covenant was set at 2,000,000 dollars. The seller's customer-level revenue schedule arrived in the fourth week, and it showed the wind-down ending earlier than management claimed. The take-out plan was a committed refinancing from a second lender. Calder completed the acquisition, and the facility was repaid in full by the end of the following year, though the covenant was breached in the second quarter.
Questions for discussion
- Which downside case should set the maximum facility size, and why not the base case?
- What would have to be true about the take-out refinancing for you to approve the bridge without a committed second lender?
- How should a credit committee weigh a long relationship with a family owner against unaudited financial evidence?
Case Study 5
Integration audit findings ranked for remediation and closure
Brannock Equipment Rental: a rental business with 22 depots, formed by combining two regional operators in a single transaction.
The situation
Brannock Equipment Rental completed a combination of two regional rental operators, and the internal audit team was asked to review the integration controls before the first annual audit of the combined group. The review covered revenue recognition on rental contracts, fixed asset registers, intercompany settlements, and access rights in the new accounting system. Fieldwork took nine weeks and produced 17 findings across five process areas. Several were inherited from the acquired operator, and others arose from the migration. The audit committee wanted a remediation plan that external auditors could rely on, and the chief financial officer wanted the plan to show clear owners rather than general commitments. Some findings touched balances the external team would test.
The challenge
The findings varied in how much they mattered. A missing approval on a single fixed asset disposal was a housekeeping issue, while a rental revenue cut-off error that moved billing into the wrong period could misstate quarterly results. The team had to rank findings by potential misstatement and by the strength of evidence behind each, assign accountable owners who would not be asked to review their own work, and define what closure would look like in terms the external auditors would accept.
Analysis
Ranking started with materiality, but the team worked from a provisional threshold because the external auditors had not yet set one for the combined group. The working figure was 450,000 dollars of potential misstatement in any single balance, with a qualitative overlay for revenue timing and related-party items regardless of size. The rental revenue cut-off finding ranked first. Testing found 38 contracts billed in the wrong month, moving about 720,000 dollars across two period ends. The disposal approval gap ranked lower on value, but it sat in a chain that also governed asset write-offs, so it stayed in the top group.
Owners were chosen by process, and nobody owned work they had performed. Revenue cut-off moved to the billing manager at the largest depot group. Intercompany settlement gaps went to the group treasury lead, since the matching failure sat in her ledger. Each finding had a closure test written before work started. For the cut-off issue, the test was a sample of 60 contracts with zero exceptions and documentation of the billing trigger. For access rights, it was a quarterly extract compared against the approved user list, with any unmatched account removed. A finding closed only when the test passed on evidence the auditors could re-perform.
- Assign owner Owner named by process, never the person who performed the work.
- Remediate control Fix the cause, then document the change and its effective date.
- Test closure Run the written sample test and retain the evidence the auditors can re-perform.
- Report and monitor Report status to the audit committee and recheck closed items next cycle.
Actions taken
- Rank every finding on potential misstatement against a working threshold, then apply a qualitative overlay for revenue timing and related-party balances, and record the reason for each placement.
- Assign each finding to one accountable owner who did not perform the underlying work, and name a reviewer for any item that spans two process areas.
- Write the closure test before remediation starts, stating the sample size, the population, the expected result, and the evidence the external auditors would need to re-perform it.
- Close a finding only after the retest passes on the full sample, then keep a monthly check on the same control for two cycles before reporting it as remediated.
Results
The team closed 11 of the 17 findings before the external audit began. The cut-off sample of 60 contracts produced two exceptions, both traced to a manual billing override introduced during migration. The finding stayed open until the override was removed, a monthly review was added, and a retest came back clean. The 38 misdated contracts were corrected in the period-end adjustment before the first close. Two findings were reported as deficiencies rather than closed, and the audit committee accepted a dated plan for them. The external team relied on the internal testing for access rights and intercompany settlements.
Questions for discussion
- How would you rank two findings if one carried a larger potential misstatement but the other showed a weaker control design affecting every future period?
- What would make you reject a closure test that a finding's owner proposed for their own remediation work?
- When should a finding that passed its retest still be reported to the audit committee as a deficiency?
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