One of the most critical, but often underappreciated skills a business can have in its accounting and finance team is the ability to shift gears quickly to respond to changing circumstances and opportunities. This ability to pivot is an intangible asset (pardon the accounting pun) that G-Squared brings to our client engagements, as this company’s story highlights.
Technology Firm Needed Outsourced CFO to Help Pivot Companies Finances
G-Squared started working with Robot Inc. (not the company’s real name), a Washington, D.C.-based technology firm, in mid-2019. The company had decided to outsource its accounting and CFO functions after suffering through unsatisfactory experiences with different internal controllers. Our first task was to (finally) get their 2018 audited financials in order.
As part of a growing but highly fragmented industry, Robot Inc. had considered buying other companies as a way to grow their business; however, they had not made any offers and started to look at other alternatives. In January of 2020, they decided to break up the company into separate software and services businesses and to merge the services division with a Malaysian company.
Their software business, now held as a subsidiary of a newly created holding company, became an ongoing G-Squared client. We handled the monthly close, made certain that revenue recognition was handled properly – that had been a challenge before we were brought in – and created budgets and forecasts that improved the company’s understanding of its cash flow and need for capital.
The company decided it needed to raise $2-3 million to grow the business, focusing on expanding its product development and sales efforts. In the process of seeking venture capital funding, Robot Inc.’s CEO was introduced to a company that was willing to provide $1.25 million in bridge financing as a path to going public through an IPO. After the bridge loan was arranged, G-Squared took on the role of providing the support needed to pursue an IPO, including due diligence required to support an S-1 filing, and preparing multi-year audited financials, which the company had not previously produced.
Construct Accurate Financial Statements, Begin Preparing for S-1
As Robot Inc. had recently divested the services side of the business, G-Squared had to carve out and construct financial statements for the stand-alone software business, preparing those audited statements for 2019 and 2020. This had to be done by February 2021, in time to file for the IPO the day after President’s Day. Shortly after the filing, we received comments back from the SEC on the S-1, and there were zero comments on the financial statements, which is almost unheard of in an IPO filing.
As we were going through the SEC’s other comments, Robot Inc. received an unsolicited offer to be acquired for $45 million. As this was far more than the company had expected to raise by going public, we stopped the IPO process and pivoted in a new direction. While it was a substantial change to shift from prepping for an IPO to readying the company to be acquired, all of the work we had done for the S-1 filing to prepare for an IPO was entirely suitable to support the due diligence for the acquisition.
Business is Thriving, Preparing to Aquire Small Firms
G-Squared continues to be Robot Inc.’s outsourced accounting and finance team. They are now considering acquiring small firms in their industry, and G-Squared will help them to evaluate acquisition candidates. From budgeting and forecasting to reconstructing audited financials, to preparing for an IPO, to helping with due diligence for acquisitions as either a seller or a buyer, G-Squared helps firms to do whatever is required to navigate the twists and turns of a company’s financial life.