New York Based Investment & Advisory Firm Outsourced with ROP and Received an
Accurate M&A Model

The Client - US-based
Investment & Advisory Firm

The client is an American Investment and Advisory Firm based in New York boasting over two decades of industry experience. The client wanted to build an M&A acquisition model with multiple scenarios for a private Fuel Station company that featured retail, restaurant, and ATM operations within their facility.

The client approached Research Optimus (ROP) for its appreciated industry presence and exposure to such projects with quick turnaround time.

M&A Modeling

The client had a very specific project requirement, including a projection of all the three financial statements with multiple scenario assumptions for the various acquisitions, sources and uses of funds, and an appropriate capital structure within the bank defined LTV (Lifetime Value) measures.

After the initial consultation, the client requested Research Optimus to prepare the detailed capital structure, and analyze a scenario where the company can divide its structure into two parts, such as - Holding Company and Operating Company. All the assets will be at the Holding Company, while the Operating Company pays the rent. Under this structure, the company reduced its tax bills and also was able to get the financing at the lower rates due to stable cash flows (rent) at holding level.

Challenges Faced during the Project

The Research Optimus analyst team faced the following few challenges while working in this Financial Modeling project:

  • The client regularly updated and modified the major acquisitions and ideas towards the end of the project timeline. The team at Research Optimus had to take measures to adapt to the adjustments to stay within the deadline:
    1. Re-modeled multiple scenarios to evaluate the feasibility and appropriate capital structure.
  • Research Optimus had to ensure that the requested time frame was adhered to despite the client’s frequent updates to the project.

ROP’s Customized Merger
Model Process

For a Financial Modeling project of this caliber, a customized approach was required. The team came up with a process to accommodate the change requests within the short project deadline:

  • Research Optimus assigned one experienced analyst to work exclusively on this project.
  • The analyst began by spreading the financials provided by the client, setting a projection of the three combined, in addition to proposing a new structure: Holding and Operating Companies.
  • After projecting the financial statements, the main objective was to understand the fund sources and uses, as well as provide advice regarding an appropriate capital structure and repayment structure for the next five years. To accomplish this, the analyst completed two tasks:
    1. Setting an LTV.
    2. Dividing the funding among term loan and preference shares.
  • After the list of likely candidates for the acquisition was narrowed down, the model was created wherein different scenarios were used:
    1. The purchase price for the acquisition.
    2. How the deal would be financed, including debt, preferred stock, and cash.
    3. Financing fee.
    4. Synergies in additional sales, and synergies in rent payment and admin costs.
  • Following these actions, the analyst then proceeded with:
    1. Sources and uses of funds.
    2. Preparing the post-merger income statement, balance sheet, and cash flow statement.
    3. Incorporated cash sweep wherein excess cash used to pre-pay term loan.
    4. Deleveraging profile.
  • A new structure was required. Thus, the ROP analyst also created a structure with the following inclusions:
    1. Holding company.
    2. Operating company with multiple assumptions, such as cap rate, separate capital structure, and forecasting three financial statements.
    3. Intercompany loans
    4. Deleveraging profile.
  • To finalize the entire project, the analyst had to allow various adjustments due to the client’s additional input. The client provided amended assumptions, data inputs, and evaluations of multiple acquisitions, all of which necessitated reevaluation in the model.
  • The project was completed on schedule and within the client’s specified budget.

Exceptional Steps Taken by
Our Financial Analysts

ROP wanted to ensure that a project of this significance would be concluded successfully, so additional extraordinary steps were taken:

  • Because the model related to the O&G industry, the analyst sought assistance from ROP’s industry experts in a different team to lend further insight into the project.
  • ROP initiated consultation with the client at several points throughout the project to ensure there was mutual clarity on assignment objectives and to better understand the client’s requirements and make the amendments on the assumptions.
  • ROP took the liberty of taking autonomous action and including the cash sweep in the model, which was highly appreciated by the client.

Overall Project Benefits

A rigorous approach to this Financial Modeling assignment enabled ROP to manage the various modifications that arose, and complete the project successfully with the following outcomes:

  • The client was pleased with the outcome and appreciated ROP’s decision to incorporate the cash sweep addition to the model.

  • The Financial Modeling project was completed on time, and the client requested Research Optimus to partner in few other projects.


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