Industry Success Stories
Oil & Gas Midstream and DownstreamYou pursue operational excellence amid a complex regulatory environment. Driving efficiency and control in Accounting & Finance, Risk & Compliance, and Business & Technology can increase your profitability.
Providing an Interim CFO to lead financial due diligence and close a deal
A private equity backed midstream company signed a letter of intent (LOI) to acquire another midstream company. The acquirer began as a start-up and did not have an accounting and finance organization with internal capacity to complete the due diligence. They came to Aventine Hill for help.
An Aventine Hill CFO Advisory Partner with extensive experience in oil and gas M&A transactions become the Interim CFO for the company. This was a new role because the current size of the company did not require a full-time CFO.
The negotiation period prior to the LOI had been almost a year. So, the goal was to complete detail due diligence as quick as possible and ensure the deal closed cleanly. The transaction was complex because the company to be acquired was twice as large as the acquirer and had a more diverse mix of assets.
The CFO Advisor coordinated the overall financial due diligence. This included:
- Oversight of the quality of earnings analysis performed by a big 4 CPA firm.
- Oversight of the valuation of core assets performed by a second big 4 CPA firm. The valuation was a critical component of the purchase agreement.
- Managing the relationships and detail agreements with the bank syndicate on the credit required to complete the transaction.
- Providing advice to the board and executive leadership team on the results of the analyses and valuations and ensuring that any obstacles were addressed quickly to stay on schedule.
As the transaction moved to completion, the company recruited for a permanent CFO who would lead the accounting and finance organization of the combined entity. Aventine Hill’s CFO Advisor participated in the recruiting process and assisted the CFO who was hired with transitioning into the role.
With the help of the Aventine Hill Interim CFO, the due diligence was completed within the compressed scheduled desired by the PE firm and company leadership. The transaction was successfully closed.
Because Aventine Hill was able to blend smoothly with the company’s fast-paced entrepreneurial culture, our team was selected to assist with the acquisition integration after the close (learn more here).
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Providing CFO leadership to resolve cost discrepancies and partnership disagreement
An early stage midstream partnership was experiencing cost overruns with a large construction project. This was generating conflict between the general partner, a private equity backer, and other investors. Without a CFO in place, the partners came to Aventine Hill to provide a CFO who could determine the facts and facilitate agreement among the partners.
Our CFO Advisory Partner quickly stepped in to understand the scope of the construction project, the vendors providing services and the contracts, and the partnership arrangement that guided how costs impacted investors. A root cause of the conflict was that there was not alignment on or consistent financial reporting of the construction costs. Working with the general partner’s staff, the CFO Advisor prepared a full analysis of the construction cost of the facility.
The partners also advised that a forensic audit would be required to fully answer certain questions that were judged as critical. With an extensive network of auditing firms, the CFO Advisor quickly met with multiple firms who provided competitive proposals. After analyzing the proposals and obtaining unanimous consent of the partners, the general partner selected a national CPA firm to perform the audit.
The CPA firm conducted an extensive forensic audit based on the revised analysis of construction costs prepared by the CFO Advisor. The results were reviewed with the general partner and other investors. The constructions costs were now accepted as valid and the general partner was better prepared to manage the cost going forward.
With the assistance of Aventine Hill, this company received expert CFO level assistance that helped rebuild confidence among the investors and better positioned the construction project for success.
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Assessing IT capabilities and preparing for growth
Oil & Gas Midstream-Downstream | Aventine Hill Partners
An early stage midstream company was not comfortable that its IT capability was positioned to support the growth that its strategy would generate. An Aventine Hill Partners’ CIO Advisor was engaged to assess the current situation and help the management team understand the options it should consider.
Because the company was early stage, the on-site assessment work was performed over two days and consisted of interviews with key business users and an extended discussion with the company’s one IT employee and a support vendor. Analysis of the information gathered allowed the CIO Advisor to create:
- A model identifying the major functions that would require software support as the company grew and which areas should be prioritized first
- Discussion of the trade-offs between on-premise and software-as-a-service (SaaS) options and which will likely best fit the agreed priorities
- An overview of IT spend to highlight where additional spend will be required to support growth
- An overview of risks from the company’s current IT infrastructure approach and alternative approaches that could better support growth
- Advice on governance and control issues, particularly were the company to consider going public
- A description of the scenarios that would drive hiring of additional IT personnel; and what type of personnel would be the next hired
Aventine Hill Partners’ CIO Advisory services proved extremely beneficial. The company decided to make some changes in how much time leadership committed to overseeing IT and what mix of internal versus external resources would provide the best support. Leadership gained much more comfort that IT would be a support for their strategy rather than something to worry about. Learn more about our IT Strategy / Business Alignment services.
Defining a merger integration roadmap to achieve quick synergies and long term benefits
A private equity backed midstream company acquired another midstream company, tripling the size of the asset portfolio. The acquirer originally began as a start-up and ran lean so did not have internal resources with the capacity to integrate an acquisition quickly. Having received assistance from Aventine Hill during the due diligence phase (learn more here), additional assistance was requested with the integration.
Aventine Hill assembled a team with the breadth and depth of experience to work both urgent and longer term issues the company would need to address to successfully manage the combined companies.
- A Corporate Development Executive Consultant led the engagement.
- One of our CFO Advisory Partners was assigned to focus on general accounting and finance integration.
- A consultant with deep expertise as a Midstream Controller was assigned to focus on business process integration across commercial, operations, plant accounting, and project/asset accounting.
- A consultant with broad experience in Human Resources assisted senior management with organization design and advised on personnel decisions and policies.
- CIO Advisory Partners were assigned to focus on IT integration, including an overall IT integration roadmap plus specific software application, infrastructure, and IT organization design roadmaps.
Aventine Hill utilizes a triage methodology that allows executive leadership to prioritize which areas of integration to pursue interim solutions for, which to focus on long term solutions for, and areas where new capabilities are needed. This company had some urgent areas of concern so where possible, discrete quick hit recommendations were provided and acted upon immediately.
Quick hit activities
- Payroll processes were reviewed and a recommendation to quickly consolidate to one provider was implemented. Related HR services were rationalized where possible and benefit plans were scheduled for standardization for the next plan year.
- Business process analysis was performed for functions where there were pain points now or were of concern because they would not scale up effectively. This consisted of documenting the “as-is” process in both the acquirer and acquired companies, then identifying options for consolidating processes. Some quick hit improvements required staffing changes to best implement and new employees with the desired expertise were quickly hired.
- Plant accounting methodologies and settlement statement reporting were simplified for the acquired company to quickly drive new value from the assets and standardize the accounting. These changes were coordinated with the Commercial organization to maximize the ability of the company to realize the desired benefits.
- A new cost allocation methodology was implemented for shared services costs so that profitability for the assets could be more accurately measured now and as synergies are realized.
- An interim approach for integrating email, file storage, and networks was recommended and executed to allow the two organizations to collaborate more effectively and to mitigate technical risks in a portion of the IT infrastructure.
Longer term recommendations
- An organization structure was designed that achieved synergies by consolidating locations and resolving redundant positions. A change management plan for executing the synergy plan was created and implemented.
- A data center and network consolidation roadmap was defined. A new co-location facility was selected to consolidate the primary IT hardware to one cost effective location. Options for additional IT standardization and improvements to be pursued after the data center consolidation were prioritized. The company can choose the pace of implementing the recommendations based on business conditions.
- Roadmap options for consolidating multiple accounting systems to one were defined and presented to executive leadership for a decision. Collaborative debate about the level of investment appropriate to the new combined company resulted in a roadmap that provides the primary value executive leadership seeks while deferring certain spend in IT.
- An overall roadmap of improvements was defined that would help position the company for an expected exit of the current private equity owners. This included reviewing internal controls to understand key steps that may be pursued if an IPO is eventually pursued.
With the help of Aventine Hill, this company was able to navigate the complexity of a merger integration successfully and begin driving new value from the acquired assets quickly. The executive team were able to “connect the dots” between the strategic and cultural goals they were pursuing and the practical day-to-day changes required to execute as a combined company.
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Helping improve corporate financial models
Publicly traded companies have to be able to accurately predict the effects of certain transactions on their financial statements and the key ratios that are used by investors to track profitability. A publicly traded oil & gas refining and marketing company found itself in need of the right expertise to improve their corporate finance model and turned to Aventine Hill Partners for help.
We provided an experienced financial analysis consultant to make wide scale improvements to their existing model, which had become cumbersome and inaccurate. Our consultant first reviewed the inputs and desired outputs for the existing model. Data input in the model was not consistent and there was no standardized way for users to make and effectively track adjustments. Hard coding of adjustments into equations was causing significant accuracy issues.
Immediate improvements were made by standardizing and simplifying the inputs – saving existing staff a significant amount of time loading data into the model. Next, adjustments were standardized in a way that was intuitive for users and security features were added to prevent the future hard coding of adjustments.
After standardizing data input, the thousands of calculations made by the model were prioritized based on the most commonly used outputs. These outputs included a Balance Sheet, Income Statement, Cash Flow Statement, Free Cash Flow Statement, debt and equity analysis, and key ratio analysis for eleven different scenarios. Our consultant reworked the entire model, simplifying calculations and matching outputs to formal financial statement packages. The end result was a significantly more accurate model that could be managed in half the time previously required from the corporate reporting staff.
Thanks to Aventine Hill Partners,this company was able to make significant improvements to a complex model, which resulted in them being able to accurately model several strategic transactions that they were evaluating. Learn more about our Financial Analysis, Planning, and Modeling capabilities.
Project and Interim Solutions
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