Building the Books From Scratch for a $240 Million Consumer Brand Sale

The Situation

The company was an iconic American consumer brand with decades of history, national distribution, and a loyal customer base that most food and beverage companies would trade a great deal for. It was also family-owned, run with a founder’s instincts rather than a finance function, and had never needed to explain its numbers to anyone outside the family.

When the owners decided to sell and engaged an investment banker, the banker’s first request was the one every process starts with: send over the financial statements. There were none. Not weak ones, not cash-basis ones, not late ones. There was no general ledger. The business had run for years on bank accounts, credit cards, and the owners’ knowledge of what was in the warehouse.

A brand this recognizable would attract serious buyers. None of them would engage without three years of financials they could test.

The Challenge

Most sell-side engagements involve cleaning up books that exist. This one required constructing them. The work had to satisfy two audiences at once: a banker who needed a defensible earnings story to take to market, and a private equity buyer whose diligence team would eventually tie every figure to source records.

Specific problems included:

• No general ledger, chart of accounts, or historical trial balances
• Revenue and expenses that existed only as bank deposits, checks, and credit card charges
• No inventory records, so cost of goods sold and gross margin could not be derived directly
• No accrual accounting of any kind, meaning cutoffs, prepaid expenses, accrued liabilities, and deferred items had to be established from scratch
• Personal and business expenses commingled across accounts, as is common in a founder-run company
• A process timeline measured in months, not years

What We Did

We started with the only records that were complete: bank statements and credit card activity going back three years. Every transaction was classified into a purpose-built chart of accounts and posted to a new general ledger, with vendor and customer detail preserved so that each line could later be traced to its source.

Revenue was rebuilt from deposits and distributor remittance detail, then reconciled to sales data to establish gross-to-net by channel. Operating expenses were categorized, with owner-related and personal items identified and documented as they were posted so the add-back schedule was built into the ledger rather than assembled afterward.

Inventory required a different approach. With no perpetual records, we rolled balances backward from the point of sale using purchase history and unit sales, establishing period-end inventory and cost of goods sold for each month across the historical window. That produced a gross margin trend the buyer could test against purchasing and shipment data rather than take on faith.

With a complete accrual-basis general ledger in place, we produced three years of monthly financial statements, reconciled every balance sheet account, and prepared the sell-side quality of earnings: normalized EBITDA with fully documented adjustments, working capital analysis, and the supporting schedules a buyer’s request list would demand. The databook was assembled from the same ledger, so the CIM, the QoE, and the data room all told one story and tied to one set of records.

The full build, from bank statements to a diligence-grade QoE, was completed in several months.

The Result

The company went to market with three years of monthly financials, a defended adjusted EBITDA, and a databook that answered most diligence requests before they were asked. The brand attracted private equity interest and closed at approximately $240 million in enterprise value.

The buyer’s diligence team was able to trace every figure in the QoE to bank and purchasing records, which is a higher standard of support than many companies with long-established accounting functions can meet. The owners spent the process running the business rather than reconstructing its history, and the sale reflected the value of the brand rather than a discount for uncertainty about its numbers.

Why It Matters

Owners often assume that the state of their books determines whether they can sell. It determines how hard the sale will be and how much of the value they keep. This engagement is the extreme case: a company with no financials at all became a company with diligence-grade financials in the time it takes most sellers to clean up the ones they already have.

The same methods apply well short of the extreme. Companies with cash-basis books, unreconciled balance sheets, or margins that cannot be explained face a smaller version of the same problem, and the same approach, building from source records to a ledger to a defended earnings story, resolves it.

If your company is considering a sale and you are not confident the books would hold up, the time to find out is before the banker asks. Let’s talk about where your financials stand today.