On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) voted to approve final rules for the enhancement and standardization of climate-related disclosures. The final rules require disclosure in annual reports and registration statements, including initial public offerings, and are narrower in scope compared to the 2022 proposed rules, including the notable exclusion of scope 3 emissions reporting. However, they still require companies to meet significant new requirements of climate disclosure. Key takeaways include, among other things:  Nonfinancial statement disclosures (Regulation S-K)  Disclosure of climate-related risks, strategy and processes: All registrants will be required to disclose risks that have had or are reasonably likely to have a material impact on the registrant’s business strategy, results of operations or financial condition. Further disclosure regarding the methods used to determine these risks, management's strategies to identify, assess and manage material risks and the extent to which these processes are included within enterprise risk management functions. Companies must also disclose material expenditures directly related to climate-related activities relative to their strategy and transition plans, targets and goals.   Governance disclosures: All registrants will be required to disclose oversight by the board of directors for climate-related risks as well as the role by management in assessing and managing material climate-related risks. This includes details regarding the process for assessing and managing climate-related risks and details around climate-related targets and goals, if such goals have a material effect on the business, operations or financials.  Greenhouse gas (GHG) emissions and assurance: Large accelerated filers (LAFs) and accelerated filers (AFs) will be required to disclose material direct emissions (i.e. scope 1 and 2) over a phased timeline. Smaller reporting companies (SRCs) and emerging growth companies (EGCs) are exempt from GHG emissions disclosures. Additionally, the final rule eliminated the proposed requirement to provide scope 3 emissions disclosure. These disclosures will require assurance from an independent GHG emissions attestation provider that has expertise with performing GHG emissions attest engagements and performs engagements aligned with professional standards. These disclosures can be filed in the second quarter on Form 10-Q in the following fiscal year or may be included as an amendment to the 10-K no later than the 10-Q due date, providing more time for registrants than initially proposed.  Financial statement disclosures (Regulation S-X):   Registrants would be required to disclose in a note to the audited financial statements the following:  Capitalized costs, expenses, charges and losses incurred as a result of severe weather events and other natural conditions, such as hurricanes, flooding, drought, wildfires, extreme temperatures and sea level rise subject to one percent threshold.  The aggregate amount of carbon offsets and renewable energy credits (RECs) recognized, and the aggregate amount of losses incurred on the capitalized carbon offsets and RECs, if material to a registrant’s plans to achieve its disclosed climate-related targets and goals.  Whether the estimates and assumptions used to produce the financial statements were materially impacted by severe weather events and natural conditions, or any climate-related targets or transition plans.  This information would be subject to a financial statement audit and the registrants’ internal controls over financial reporting (ICFR).  The following table summarizes phased requirements across registrant types and rule dimensions:    
Please see the SEC factsheet for further details on the final rule. Note the above summary is not exhaustive and there are other disclosure requirements pertaining to use of carbon pricing, transition planning, use of assumptions and other required reporting elements.   Impacts for middle market companies   While the exclusion of scope 3 reporting may minimize the impacts to private and public companies, requirements for climate risk disclosure are likely to impact value chain participants. Affected companies will require detailed assessment of material climate-related risks, likely spanning the assessment of climate impacts on sourcing and supply chain disruptions.   Private middle market companies should prepare to engage in climate risk assessment exercises and can do so efficiently with a clear process for assessing and managing their own material climate-related risks.   Public companies subject to these rules should prepare by assessing current climate practices and creating formal processes to determine materiality of climate-related risks, damages and direct emissions as applicable. Integrating this with enterprise risk management procedures will help to improve governance and controls ahead of integration with SEC filings and future state assurance requirements.   Baker Tilly environmental, social and governance (ESG) and sustainability services   Our ESG and sustainability services provide support across all dimensions of the proposed rule. This includes:

On March 6, 2024, the SEC announced final rules for climate-related disclosures, including the disclosure of material direct emissions.

ESG and sustainability 

Risk Advisory

Assurance

Sarbanes-Oxley (SOX) Compliance

CFO Advisory Services

SEC announces final rules for climate-related disclosures 

video As senior living leaders begin to set and achieve growth goals for their organizations in 2024, they must demonstrate perseverance within a rapidly changing environment.   Listen to Baker Tilly’s informative on-demand webinar where our team explores trends and challenges for senior services leaders to be on the lookout for in 2024 and the pathways for reaching success. In addition, we discuss how industry leaders can prepare for affiliations, identify growth opportunities and expand service offerings, explore strategic opportunities of middle market housing and services and more.  

Watch our on-demand webinar to learn about senior living trends and challenges in 2024 and beyond as well as how you can position your organization for success.

Healthcare & Life Sciences

Not-for-Profit

Senior Services

Development Advisory 

Medicare & Medicaid Reimbursement Services

Transaction Advisory Services

Senior living trends and challenges in 2024 and beyond

Video Middle market insight webinar hosted by The Association for Corporate Growth (ACG)  An acquisition is a meticulously planned event before closing the deal. A quality of earnings is often obtained, and significant analysis is conducted. However, the true challenge arises once the deal is closed. Many companies find themselves unprepared or understaffed to handle the pressures and challenges of the post-acquisition 100-day period.   In this webinar, presenters explore strategies to employ during those crucial first 100 days, as well as actions to take before closing, ensuring that your acquisition sets off on a path to success.  Key takeaways include: Understand how to properly plan for an acquisition Gain insights into the post-acquisition timeline Identify key focus areas immediately after an acquisition Recognize potential risks in advance and develop mitigation strategies
This webinar is intended for: Private equity, corporate executives, board members, investment banking, financial institutions and others who want to learn more about data strategy.

Watch this on-demand webinar to learn strategies to employ during those crucial first 100 days, as well as actions to take before closing, ensuring that your acquisition sets off on a path to success.

Private Equity & Portfolio Companies

Transactions

Navigating the first 100 days post-acquisition

 Pre-transaction, the first stage of the private equity transaction life cycle, includes some of the most critical steps in helping to ensure the short-term health and long-term viability of a deal. A quality of earnings (QoE) report, for instance, is a critical component to the financial due diligence process. In many ways, a QoE report sets the tone for the entire transaction, so all involved parties are typically quite invested in the timeliness and accuracy of the QoE report.  That said, preparing a QoE report can be a challenging part of the process, particularly when a company does not have its books and records in order. Inaccurate financial information can cause significant delays in the QoE report and, therefore, the transaction. Additionally, it can result in a lower valuation of the company due to concerns about the overall business due to the lack of clean financial information. It’s not necessarily a matter of sloppy bookkeeping either. Some companies may not possess the resources to maintain books and records to the extent needed for a major transaction. Also, typically a company’s finance team must devote its day-to-day attention to other vital areas. In either case, Baker Tilly is prepared to assist.  
After all, with the timing of transactions as critical as ever and the cost of capital continuing to rise, every day makes a difference.  To learn more about Baker Tilly’s CFO advisory services or to discuss your specific situation

Preparing a quality of earnings report during the pre-transaction stage of a private equity deal has some challenges. Find out how Baker Tilly's CFO advisory services team can assist your company to allow your finance team to focus on running the business.

Due Diligence

In private equity transactions, Baker Tilly’s CFO advisory services shine behind the scenes 

Obviously closing a transaction requires an enormous amount of time, energy and money. Yet oftentimes there is so much focus on securing the deal that the post-transaction elements get lost in the shuffle until it’s too late.  When companies arrive at the post-transaction phase, too often senior leaders find themselves asking questions like: “So we have a post-transaction plan, but do we have the necessary resources to actually implement that plan?” The answer, quite often, is “no.” At Baker Tilly, our CFO advisory services serve as the glue for companies in the early portions of the post-transaction phase. It can be a delicate time for a newly formed (or newly acquired) business, as the first several months post-transaction often set the tone for the long-term viability of the company.  
To learn more about Baker Tilly’s CFO advisory services or to discuss your specific situation

Learn how Baker Tilly's CFO services team assists clients with team structure assessment, financial reporting, and operational improvements to ensure long-term viability of newly formed or acquired businesses. 

Baker Tilly’s CFO services play key role in post-transaction process

Business and organizational leaders have a significant responsibility to proactively address a rapidly evolving, complex and unpredictable risk landscape, as well as provide stakeholders with a greater level of assurance, according to Heather Acker, Baker Tilly’s national risk advisory practice leader. At the same time, regulation continues to increase and remains extremely relevant in this space. Properly planning for and spending resources on preventing the unknown risk is necessary in this dynamic environment.  During a recent webinar, Acker led a roundtable discussion alongside three other Baker Tilly senior risk advisory partners on the current risk environment. The panel delved deeper into three specific risks that industry and organizational leaders are facing in 2023: (1) talent, (2) cybersecurity and (3) environmental, social and governance (ESG) issues. Following is an edited version of their comments. Dynamic risk landscape Ben Quigley, principal in the risk advisory practice. The pandemic changed the way that organizations think about resourcing themselves to manage risk. This includes having a proper governance model in place that is risk-proportionate to the organization, combined with having the right talent to identify emerging risks more successfully and to shift resources, as needed, to help the organization respond to incidents they weren't prepared for prior to the pandemic. Risk stewards of organizations are getting smarter with how they organize and prioritize risks. Aside from high-impact risks to an organization, and compliance risks related to specific laws and regulations, risk stewards may need to consider some form of proactive assurance or advisory-based assessment to prepare for emerging risks. Assessing changes an organization may need to make to address emerging risks can be an effective use of resource time. If an organization implements a new system, process, department or program to support an emerging risk, an internal audit may lean in and provide subject matter expertise about how a strategic change is being implemented. This focus allows the risks of change to be identified and managed before they have a chance to become issues that impact operational performance, and before regulation mandates that risk be managed. Cassandra Walsh, national business risk services practice leader. The pandemic served as a catalyst for organizations across all industries to have an increased focus on their enterprise risk management (ERM) program and to define or redefine the responsibilities of the board, senior leadership and mid-management over operational, legal and compliance areas. The interconnectivity between ERM and internal audit compliance is central to supporting an organization's risk management activities. Organizations understand that the pandemic emphasized that the only constant in the business environment today is to be prepared for continuous change. And organizations need to set up their risk management infrastructures accordingly. The pandemic disrupted organizations’ ability to operate in a particular business model and with a workforce that was built to operate in that business model. Organizations were forced to pivot creatively and with a velocity that did not allow time for trial and error. Rapidly changing your business model or numerous attributes of your work environment also affects an organization's ability to identify, address and manage past, current and future risks. This includes being able to stay on top of regulatory and compliance requirements, not just internally but also externally to appropriately understand and define something like ESG before it becomes a fire drill. Organizations also are recognizing the need to look both internally and externally for expertise in areas like internal audit and advisory support, as well as compliance and legal assistance to stay on top of current and emerging risks. Jeff Krull, national cybersecurity practice leader. Due to the increase in cybersecurity incidents in recent years, in particular data breaches, organizations are looking for comfort from their suppliers and other business partners to show that their systems are secure. However, there is no magic bullet or single playbook today that organizations can depend on to know that their suppliers’ and business partners’ systems are secure. Risks are constantly changing, and organizations must consider not just risk from the customer or regulator perspective, but how the organization balances investing in more cyber-risk protections versus purchasing cyber insurance. Talent Acker. The news about the talent problem is confusing – we see headlines about the “Great Resignation” and also about large job cuts, especially in the technology sector. At the same time, employers are facing skill gaps for significant roles. Because of demographic shifts, especially as more baby boomers retire, the U.S. Bureau of Labor Statistics estimates that by 2025 there will be fewer available workers ages 18 to 64 than open positions. Quigley. Because employees are demanding a better work-life balance, organization leaders need to use data and listen to employees to develop an informed approach to structuring the workforce. In the end, however, employees at all levels should be focused on the quality of the hour spent at work, a “work smarter, not longer” mentality, which we're certainly seeing prevail across most industries. Walsh. Before addressing the talent pool from a people perspective, it's important for organizations to address the structural questions around defining the workplace, the workday and the workforce. Defining the workplace includes determining whether the workplace is fully remote, fully on-site or a hybrid of both. Discussions about the workday were occurring even before the pandemic, but more organizations now realize that expectations about how many days and hours define the workweek have risen in importance among the talent pool they're trying to hire. Finally, defining the workforce is not just about the organizational infrastructure, but also needs to consider diversity, equity, the technical skills across all areas of a business, the necessary outputs needed from these individuals, how to compensate and reward the workforce, and how to show a path of professional growth. Organizations are turning towards bringing in partners, whether outsourced or co-sourced, to help fill the needs when full-time equivalents do not exist to do certain jobs. Organizations are looking outward to maintain growth and meet regulatory requirements, but also to avoid legal compliance issues, revenue declines or poor product quality outputs. Krull. From a cybersecurity talent perspective, if you're an organization that went remote during the pandemic, but now wants people back on premise, it may be difficult to retain your cybersecurity employees who might have other remote work options. We're seeing a real churn in some of these cyber positions at a time when many organizations have a laundry list of cybersecurity projects that need to get accomplished. One spot of good news is that many higher education institutions have started creating cybersecurity majors and various types of cyber programs. The challenge is that very few organizations want to hire entry level cybersecurity professionals; they are looking for people with three, five or 10 years of experience, depending on what skillset they're looking for. Cybersecurity Krull. Verizon’s annual data breach report shows that 82% of breaches involve the human element – stolen credentials, phishing, misuse or simple errors. In most cases, this relates to a breakdown in basic cybersecurity controls, like ensuring that everybody has strong passwords and that multifactor authentication is enforced. Organizations not only have to make sure that their most important systems are secured, but also non-mission critical systems, because the latter is often the entry point for a bad actor who can then access all your systems. Almost all data breaches are related to financial gain, so there are some well-funded criminals who will continue these attacks because they are taking these funds and “reinvesting” them into their businesses. We are not at a point where cybersecurity gets easier; it will remain one of these risks that continues to evolve, and every organization will need to keep investing the necessary resources to protect the organization from both new and old risks.  ESG Acker. ESG and related risks soon will be affecting organizations across most industries, either through requirements and regulations (such as the SEC’s climate impact regulations) or through stakeholder requests for information beyond an organization’s financial results. Quigley. Pressure related to ESG is coming from large corporations, compliance requirements, internal and external stakeholders, and the institutional investors who own public shares in a company. Most Fortune 500 companies have established sustainability teams. They've published ESG and sustainability reports and have action plans and initiatives to improve ESG metrics. In some cases, this means they're asking more of their suppliers and service providers through supplier codes of conduct and requests for net zero carbon pledges. More companies will need to comply with ESG-related requests from their buyers if they want to continue working with them. In November 2022, the federal government issued a proposed rule that anyone selling more than $4.5 million of goods and services to the federal government will need to disclose their greenhouse gas emissions and have them validated. If a company does business with the federal government, it's a future risk to consider. The European Union announced a new proposed rule that would require a much wider set of ESG disclosures, including social and governance topics that would apply to public and private companies with over 40 million euro in revenue. Also, banks are starting to request ESG information as part of their underwriting process. Right now, it's more voluntary and focused on data gathering as opposed to affecting interest rates, but this could change. Walsh. Many boards and organization leaders are talking about ESG even if they don’t think they are being asked to do any reporting yet. These conversations focus on where to start and how to address ESG when it hasn't been asked of you yet. If they take a closer look at their existing enterprise risk management plan, they may find that they have already incorporated elements and philosophies of the ESG standards into their plans. Final thoughts Krull. An organization cannot view cybersecurity as something that is accomplished and checked off a list. It’s more like peeling an onion – organizations will address the risk right in front of them, and then they're going to move to the next set of risks. Expect cybersecurity to be an area where organizations will continually take an objective look at it, and always be working through old risks that maybe weren’t addressed well in the past, as well as any new risks that arise. Walsh. Governance is key to managing existing and emerging risks. Everybody in an organization should understand their role as it relates to risk. Proper communications and conversations about risk need to happen between the board, the C-suite, risk managers and risk owners. While many organizations have the structure and the resources in place, many are still trying to mature their risk management activities.  Quigley. While the concept of ESG can seem overwhelming, many parts of ESG relate to things an organization is already evaluating, tracking and collecting data on – worker safety, data privacy, cybersecurity, fair hiring practices, board governance and energy procurement. These are just part of everyday business operations to keep the organization sustainable. The key now is to start to build awareness within the organization, starting with educating the board and senior leadership on ESG so they understand why it needs to be addressed. Organizations can establish a governance structure to support ESG awareness and compliance and integrate it within existing risk management practice, while looking at which ESG topics are most material to the organization and its stakeholders. ESG frameworks exist that can help an organization understand what ESG metrics are important. The risk of not starting the process now is that you could lose revenue because you're not prepared. At the very least, not being proactive and establishing an ESG approach now could lead to scrambling to address ESG-related issues in the future, taking time away from day-to-day operations and possibly resulting in improper disclosures to government agencies or stakeholders.

A discussion on how dynamic the risk landscape has become and how organizations can develop a better risk culture to pivot enterprise risk management (ERM) plans as needed to address emerging risks.

Family Business

Financial Services

Manufacturing & Distribution

Baker Tilly Digital

Construction Risk Management

Cybersecurity

Fraud & Forensic Investigations

Municipal Advisory

Dynamic risk landscape creates challenges regarding talent, cybersecurity and ESG

VIDEO
In this video, Partner Jen Finger shares key points of the second stage of the life cycle: Build strong foundation. Key topics discussed: Overview of post-acquisition processes Role of the CFO advisory team throughout the process Analysis of a typical acquisition scenario Setting-up companies for success Additional value provided by the CFO advisory team Watch the video now for a deep dive into those crucial first 100 days.
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Welcome to Value Creation Conversations, a new series featuring insights from specialized professionals at Baker Tilly. In this episode, Jen Finger shares key points of the second stage of the private equity transaction life cycle: Build strong foundation.

First 100 days: Build strong foundation 

VIDEO Welcome to Value Creation Conversations, a new series featuring insights from specialized professionals at Baker Tilly. Each conversation explores a different stage of the private equity transaction life cycle through interviews with the firm's leaders.  In this video, managing partner Cary Mailandt and partner Brian Francese share their insights on the various practices and services offered by Baker Tilly that are relevant to private equity firms and their portfolio companies. Grow with us as we delve into the private equity transaction life cycle.

Welcome to Value Creation Conversations, a new series featuring insights from specialized professionals at Baker Tilly. Each conversation explores a different stage of the private equity transaction life cycle through interviews with the firm's leaders. 

Commercial Due Diligence

Investment Banking 

Mergers & Acquisitions

Strategy & Management Consulting

Valuation & Corporate Finance Advisory

Valuations

Explore the private equity transaction life cycle

Nurturing a healthy risk culture  What is risk? Organizational risk generally includes the many things that will lead to an undesirable outcome or impede an organization from achieving its strategic objectives. This includes the risk of not identifying opportunities to grow a company or further an organization’s mission. Companies and organizations face a variety of risks. Some are unique to a particular sector or industry; some are more universal. Over the past year, as Baker Tilly professionals worked with their clients, certain risks were mentioned more than others:  Finding and retaining the right talent Dealing with an increasing variety cybersecurity events Mitigating supply chain gaps and delays Identifying environmental, social and governance (ESG) standards Preparing for one-of-a-kind black swan events When a company is focused on running the business, catering to customers, or serving the needs of clients or constituents, building an effective risk culture isn’t easy. However, a strong culture can be built over time, when inspired and nurtured by effective leadership. Ultimately, having a strong risk culture means that management and employees know what the organization stands for and the boundaries in which individuals can operate. In a healthy risk culture, the board, senior leaders, managers and employees will be empowered to discuss and debate openly which risks should be taken in order to achieve the company's long term strategic goals.

Baker Tilly practitioners take a closer look at some of the critical risks organizations are dealing with now, how those risks have evolved in recent years and some basic strategies to effectively manage those risks. 

The evolving risk landscape

This GrowthTV episode is presented by the Association for Corporate Growth (ACG) and Baker Tilly. Jennifer Finger, partner and leader of the firm’s CFO advisory practice in the Midwest, joins ACG’s GrowthTV to talk about her role helping overburdened CFOs cope with the increasing list of responsibilities they’re faced with.  Watch this video to get Jen's practical advice about how companies can scale their CFO’s capabilities and resources to grow the organization more effectively.

Jennifer Finger, partner and leader of the firm’s CFO advisory practice in the Midwest, offers practical advice about how companies can scale their CFO’s capabilities and resources to grow the organization more effectively.

Managing the changing role of the CFO

Going public. It’s a massive, transformational effort with the potential to enhance value and create new  growth opportunities for your company. Successful organizations will engage in steps shown below in order navigate the risks and maximize the rewards in their initial public offering (IPO) journey.

Organizations successful in going public will engage in these critical steps to navigate the risks and maximize the rewards in their initial public offering (IPO) journey.

Technology

Insurtech

Life Sciences

IPO Readiness

IT Sarbanes-Oxley (SOX) Compliance

Public Company Audit

Going public: A path for success

Client need Our client enlisted Baker Tilly to assist with post-acquisition accounting as well as a personnel assessment and integration of accounting and IT controls/processes.  Baker Tilly solution Post-acquisition accounting: The Baker Tilly team coordinated and compiled the necessary documentation required to prepare purchase accounting. Providing an easy-to-read walk-through document, Baker Tilly recorded all purchase activity, along with necessary fair market value adjustments including all essential transactional activity supporting the open balance sheet and a memo documenting the fair value markup supporting all entries included in the document for the client’s auditors to easily audit the opening balance sheet. Additionally, Baker Tilly served as the point of contact coordinating with the internal valuation team to verify that all intangibles were properly valued and detailed within the transaction document.  Personnel assessment: Through discussions with new ownership, interviews with current executives, department heads and staff, and a focus on the current control environment and process methodologies, Baker Tilly identified areas of opportunity in leadership, controls and efficiencies. This newfound knowledge helped Baker Tilly properly assess the structural needs of the organization. With a full circle approach, Baker Tilly provided recommendations on how to integrate organization personnel by sharing common hurdles companies often experience with integration and providing suggestions of how to overcome them based on its expertise and industry specialization.  Integration of accounting and IT controls and processes: Baker Tilly performed a current-state assessment of the entire finance function, including IT controls and processes, and worked with management to understand organizational needs and priorities. Baker Tilly gained insight and strategy specific to the client through many one-on-one discussions with executives, regarding activities within their roles and responsibilities, which led to the accuracy and representation of the financials. With client collaboration, Baker Tilly recommended integration strategies suitable for the client’s current landscape as well as its goals for the future. Results Baker Tilly’s onsite presence allowed the client to fully integrate the entire organization post-acquisition. As a result of Baker Tilly’s work, the client experienced: A proper and auditable documentation of the transaction A thorough review of personnel, eliminating gaps and redundancy  A smooth transition of accounting and IT systems A full implementation of controls For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

Find out how our client enlisted Baker Tilly to assist with post-acquisition accounting as well as a personnel assessment and integration of accounting and IT controls/processes. 

Post-acquisition integration services help client transition seamlessly

Client need In preparation for a required audit, our client needed to convert its financials from cash basis to generally accepted accounting principles, prepare support schedules, reconcile accounts and prepare draft financial statements.  Baker Tilly solution With accounting experience and expertise on their side, the Baker Tilly team systemized the client’s books and records and developed supporting schedules and balance estimates through an auditor’s lens to ensure the materials were thorough and accurate. Baker Tilly proactively gathered the necessary documents in support of account balances and communicated to the client the anticipated requests that it would expect to see from the auditors based on the client’s business, financials and state of records. After ensuring accuracy in the client’s books, Baker Tilly served as an intermediary between the client and auditors. Baker Tilly facilitated this process by communicating directly with the auditors and addressing audit questions instead of having the client do it, saving the client valuable time and resources. Results With Baker Tilly serving as its advocate throughout the entirety of the audit, the client was able to refocus on day-to-day responsibilities and could rest assured the auditors were provided with timely, accurate information. Baker Tilly’s tailored, collaborative approach resulted in an efficient, successful audit for the client, without the additional expense of utilizing or hiring in-house audit personnel.  For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

Find out how Baker Tilly helped a client convert its financials from cash basis to generally accepted accounting principles, prepare support schedules, reconcile accounts and prepare draft financial statements. 

Baker Tilly serves as client advocate throughout audit

Special purpose acquisition companies (SPACs) are not new investment options, but their popularity has grown dramatically in recent years, as a vehicle for private entities to merge with an existing public shell or “Blank Check Company.” This type of merger is often more attractive than a traditional initial public offering due to the perceived ease of merging with a SPAC. Prominent underwriters and investors have also become more attracted to SPACs due to the relative speed in which deals are consummated. In 2020 alone, more than 50 SPACs were formed in the United States, raising more than $21.5 billion. As of August 2021, SPACs have raised more than $117 billion [1]. Private companies going through the SPAC process will need to consider the extensive process prior to the SPAC deal being finalized. These companies will be required to have their financial statements (typically two years of audited financial statements) audited under the standards set forth by the Public Company Accounting Oversight Board (PCAOB). Oftentimes these companies find that their current firm may not be independent under the PCAOB standards (prior independence under AICPA standards is much different). Management teams will also work alongside the SPAC’s management team in order to prepare the required proxy and legal registration statement in the Form S-4. There are several considerations during the initial planning phase that boards and management teams need to take into account prior to this process. For instance: Negotiation and merger agreement Have you identified the right SPAC? Has management discussed the future of the company? Selecting the right SPAC is the most critical of all the steps. When companies go through the process of going public, but they do not have an acquisition agreement in place with a SPAC, hiring various external resources and professional firms may be costly and the company can run the risk of the high cost of these resources affecting or possibly even ruining the SPAC deal and leaving the company with costs that it cannot recover. On average, a company will need to budget for a substantial increase in legal, accounting and consulting costs, which is discussed in detail below.  Quality of financial statement and supporting information More often than not, companies that are not public and have not gone through the scrutiny of an external audit do not have a strong system in place as it relates to their financial statements, whether it’s a process around month-end close, financial disclosures, accounting memos, processes and procedures, internal controls or even a comprehensive accounting staff. When the initial planning phase of the SPAC process is occurring, companies will need to do a thorough internal examination of the overall quality of the company’s books and records. Management should assess the practicality of the company being able to achieve an unqualified audit opinion from a PCAOB audit. Should a company find any of the elements previously mentioned as a point of concern, the company should address these deficiencies first before hiring an external audit firm. These aspects will be highlighted by the external audit firm as significant deficiencies and could be the determining factor as to whether the company receives a Qualified, Unqualified or Adverse audit opinion. Consideration of external professional services Raising capital can be an expensive endeavor. In addition to the hours the internal team will need to dedicate to creating, organizing and/or submitting various financial and accounting schedules (which will need to be considered a full-time job for a person within the organization), companies often will need to engage various professional service organizations to help complete the process.  First and foremost is the need to hire an independent audit firm to conduct a PCAOB standard audit. The PCAOB, formed in 2002, established and maintains the highest quality of auditing and related auditing services of public companies in order to protect investors and the public’s interest in the preparation of an informative, accurate and independent audit report.   External legal counsel with relevant expertise will be critical to the SPAC process. Legal counsel will facilitate the legal framework throughout the process of going public. Much of their work revolves around completing the proxy and legal statements on the Form S-4, which is required by the Securities and Exchange Commission (SEC). When completing a SPAC transaction, the required documentation that must be filed is the combined proxy and registration statement on the Form S-4.  The final firm to consider when going public is an advisory firm with significant audit experience to help facilitate the monumental task of making this process efficient and timely. This firm will serve as the project manager of the entire process, whether that means assisting the company in closing its books, creating schedules or serving as a liaison with the external audit firm while the audit is taking place. Advisory firms will also coordinate with the legal team on all fronts to ensure the inclusion of all financial information is properly presented and organized within the S-4 filing.  The SEC is the final regulatory body that will determine whether S-4 is effective for final filing. The SEC staff review process related to the SPAC deal follows the typical process of an IPO, in that the staff will review the filing report and issue comment letters, which almost always results in multiple rounds of comments.  When the SPAC deal is finally consummated, the company must file a current report on a Form 8-K within four business days announcing the deal; then the company has 68 days to submit a “super” 8k with the audited financial statements and associated pro formas. With a short turnaround time, it will be imperative to have much of the financial information prepared in advance of the final deal date. Conclusion The process of going through the SPAC is a labor intensive endeavor for any organization. It’s important to contemplate the various nuances outlined in this article before beginning this journey. However, once the organization has aligned itself and committed to a SPAC agreement, our firm can guide the company through the entire process and make it as painless as possible. For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.  [1] “Proceeds of special purpose acquisition company (SPAC) IPOs in the United States” statista, Sept. 2021

Private companies going through the Special Purpose Acquisition Company (SPAC) process need to consider the extensive process prior to the SPAC deal being finalized. Find out what main three key considerations companies need to take into account.

Key considerations for companies envisaging SPACs

video The recent surge in special-purpose acquisition companies (SPACs) has the U.S. Securities and Exchange Commission (SEC) raising a cautionary flag. Is this just a passing speed bump or do SPACs present more challenges than they are worth?  During this on-demand webinar, you will: Hear directly from Baker Tilly client and WM Technology CFO Arden Lee about his experience having just undergone a SPAC transaction Receive a brief update on recent guidance issued by the SEC Learn about critical aspects of governance and internal audit required of public companies Gain an understanding of common pitfalls experienced by companies going public via SPAC Who should watch the recording? This webinar is intended for board members and executives considering SPAC opportunities, investors and sponsors looking to learn more about SPACs, CFOs, finance/accounting, internal audit, private company executives and legal professionals.
With your needs in mind, our Value Architects™ help you achieve your vision. For more information on this topic or to learn how Baker Tilly specialists can help, contact our team.

Hear from WM Technology CFO Arden Lee about his experience having just undergone a special-purpose acquisition company (SPAC) transaction and learn about recent guidance issued by the SEC.

Real Estate

Insurance

Asset Management

Real Estate Investors

Banking & Capital Markets Coronavirus Resources

Financial Statement Audit

Real conversations: going public via SPAC

Authored by Mickey Moreno   Space Based Assets (SBAs) contribute increasingly valuable services to the global economy. According to recent estimates the number of satellites in orbit will quintuple over the next decade[1].  Commercial space satellite constellations are primarily made up of communications and broadcasting satellites in geostationary orbit; these satellites represent almost 50% of the $70 billion of commercial revenues expected over the decade. The two other large commercial markets for SBAs are for non-geostationary orbit satellite constellations for communications (25% of revenues) and earth observation (11% of revenues). New commercial markets are emerging for in-orbit services such as life extension[2].  SBAs are complex to develop and bring unique financial reporting challenges to remain compliant with Generally Accepted Accounting Principles (GAAP). Drawing on Baker Tilly’s extensive experience in all aspects of the development, operations and disposal lifecycle for SBAs, we work with the Program Management Offices (PMO) staff, Engineering Project Managers (PMs) and business managers to arrive at the appropriate accounting treatments and support the reporting and auditing processes.  The following are the top five accounting and reporting considerations for assets in orbit:
Where we are today; where we’ll be tomorrow: The future is bright for SBAs. As smaller scale satellites become increasingly viable from a technological and economic standpoint the number of assets in orbit will continue to increase. As overall costs and development timelines decrease we expect to see more satellite launches and more organizations that will need to address the reporting for on-orbit assets. Given this expected increase, Baker Tilly is always available to assist with any financial reporting, budgeting and technical accounting services you may require, including current state program assessments, remediation implementation, process improvement and financial reporting improvements. Please contact us  for more information about in-orbit accounting, our CFO Advisory services or anything else you need from Baker Tilly’s team of specialists.

Space Based Assets (SBAs) contribute increasingly valuable services to the global economy. Find out what are the top five accounting and reporting considerations for assets in orbit.

Top 5 considerations for assets in orbit

Many organizations are experiencing major disruptions to cash flow, caused by the sharp decline in business activity. These organizations are reshaping strategies and facing hard, and potentially risky, business decisions. During these uncertain times, organizations need to ensure they are placing high importance on fiscal management and undertaking cost-reduction efforts to get “back to basics.”  One rapid-cost takeout solution that will achieve cost reduction and accelerate cash flow for your business, while not threatening your customer value proposition, is re-negotiating your lease portfolio.  Lease re-negotiation strategies Negotiate longer term lease in exchange for free or reduced rent now Negotiate percentage rent for a period of time, with a payback on the backend and with interest, if necessary Negotiate the ability to sub-lease all or part of the space, if not already present in the lease Extend term and spread amortization of a significant tenant improvement allowance over a longer term to reduce payments Present financial information (i.e., balance sheet, 13-week cash flow, etc.) that shows near or at insolvency, and discuss the threat of lease rejection, if bankruptcy filing occurs Steps in the re-negotiation process  Connect with us In addition to lease re-negotiation and the process outlined above, our professionals stand ready to help you navigate accounting changes due to re-negotiations, implement ASC 842 Lease Accounting and lease administration software, and analyze your 13-week cash flow. For more information on these topics, or to learn how Baker Tilly specialists can help, contact our team.

Need to reduce costs?Accelerate cash flow through lease re-negotiations with Baker Tilly.

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Accelerating cash flow through lease re-negotiations

The next 13 weeks When the economy goes from a position of strength to one of uncertainty in a relatively short time, the pressure on your business is real and overwhelming. Understanding your cash flow should be a priority as you navigate your options. It takes cash, not book earnings, to meet your obligations and survive economic downturns. Using traditional accounting and finance metrics such as net income, net operating cash flow, and earnings before interest, tax, depreciation and amortization (EBITDA) can be misleading and dangerous during times of declining sales and economic calamity. If managed correctly, many businesses are able to increase their available cash at the end of a recession. This can be achieved through swift cost reductions and reduced investments in net working capital (e.g., inventory) while converting assets (e.g., accounts receivable) into cash. The analysis is analogous to an airplane taking flight requiring both speed and altitude – you must optimize both the balance sheet and operations simultaneously. To accomplish this, a thorough understanding of your operating cash cycle along with your fixed and variable cash obligations is necessary. Start by developing a 13-week cash flow model A 13-week cash flow model arms you with a tool that highlights some of the critical decisions you must make during these turbulent times. It is a preferred analysis tool performed to give you and potential lenders insight into the next 90 days’ sources, uses and cash positions with the appropriate level of accuracy. For many businesses, 13 weeks represents a trip around the operating cash cycle and provides a detailed view of cash inflows, outflows and the ability to meet obligations as they come due. The answer of where cash is produced and consumed and the resulting expected cash position is analyzed in weekly detail over the 13 weeks. It will highlight areas of cash shortfalls in advance, so you are prepared to act proactively. The tool enables operational and capital decisions to be made with high degrees of confidence in situations of deteriorating business activity. This is especially relevant in our current environment, where uncertainty surrounding liquidity and solvency is leading to an acute need for visibility of cash availability to meet needs such as debt service, material purchases and payroll.  Use data to make informed decisions  All industries are affected by our current environment, so it is more important than ever to have the most current and up-to-date information. As a 13-week cash flow is assembled and updated on a weekly basis, detailed information is readily available in advance of the typical monthly financial close process in order to make nimble, informed decisions. This tool will allow you to make the difficult decisions that many of us will be facing over the coming days, weeks and months. These decisions and activities are likely to include: customer credits and discounts, fixed and variable cost reductions, supplier terms negotiations, lender negotiations, landlord negotiations, organizational changes, federal and state stimulus program applications and other such items.  We understand these circumstances are unique and unprecedented for you. Prioritizing your information as you navigate very difficult business decisions will provide a level of stability moving forward. The 13-week cash flow analysis will guide you in the near term as we continue to push forward.  

Understanding your business’ cash flow should be a priority when the economy goes from a position of strength to one of uncertainty in a relatively short time.

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The importance of cash flow during uncertain times

The office of the CFO is increasingly complex and equally broad in its mandate. Our CFO advisory services are aligned to support this critical function from strategic finance and decision support to core financial and accounting services.

Forklift manufacturer enlists Baker Tilly for help in on-boarding new controller and creating an opening balance sheet after an acquisition.

Manufacturer finds efficiencies during acquisition

Baker Tilly provides critical advisory services and support to financial leaders, business owners and investors that meet the unique challenges, complexities and the ever changing environment the office of the CFO faces.

Baker Tilly leverages resources with extensive industry and public accounting experience to manage projects and assist financial organizations with the role of the CFO.

In private equity transactions, Baker Tilly’s CFO advisory services shine behind the scenes

Frank Walker is a partner and leader of Baker Tilly’s transaction and financial advisory practice. 

Cary Mailandt is managing partner and practice leader for Baker Tilly’s business advisory services practice.

Jennifer Finger serves as a partner with Baker Tilly’s business advisory services practice.

Royce is a partner in the middle market advisory services practice of Baker Tilly. 

Ken Fleming is a partner in our Tysons, Virginia office (D.C.) and advises businesses, owners and investors on merger and acquisition (M&A) transactions and serves the office of the CFO.

Dan Martin is a director in Baker Tilly’s CFO advisory practice.

Mike is a partner in the consulting services practice of Baker Tilly. Mike Gayler has almost 40 years of experience in public accounting and as a chief financial officer of several companies. He helps companies solve a variety of complex business issues based on his extensive experience in numerous industries, including construction, distribution, entertainment, healthcare, manufacturing, oil and gas, real estate, retail, service and technology industries.

Zak Everson is a partner in the audit practice of Baker Tilly and leads the technology practice of the Dallas market. 

Jason Winterburn, a partner with the financial advisory services group in Baker Tilly’s Tysons, Virginia office, has been with the firm since 2008.

Zaid Sultan is a director with Baker Tilly’s forensic, litigation and valuation services practice.

Jeff Weinberg is a director with Baker Tilly’s advisory services practice.

Baker Tilly works with clients on mergers, acquisitions, capital sourcing and markets, project finance, due diligence, valuation and transactions

Baker Tilly works with clients on mergers, acquisitions, project finance, due diligence, valuation, capital markets, capital sourcing, and everything around a business transaction. 

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Helping organizations plan their path — whether it be through an initial public offering (IPO) or other path to going public — we help you navigate the risks and maximize the rewards in your journey.

Successful public companies start the initial public offering (IPO) readiness process early and actively engage with trusted partners to navigate risks and complexities and accelerate growth opportunities.

CFO Advisory Services

At a glance

Managing the changing role of the CFO