The deal had closed. The handshakes, the wire transfer, the quiet exhale after months of negotiation -- all of it was behind them.
What remained was a consequential earn-out: two years of revenue performance that would determine a significant final payment. The founders were no longer directly involved and the financial reporting now ran through the buyer’s systems. Building a credible case from that position was going to take a substantial effort.
That’s when Kirk Van Alstyne called CFO Selections.
A process built for this moment
Kirk is a managing partner at Evolution Capital Advisors, an investment bank focused on technology M&A. He had run the original sale process for the company, a B2B vertical SaaS business built and owned by a small group of founders, and a leader in its category for decades. The founders were ready to transition. Kirk’s job was to find them the right buyer at the right value.
He ran a discreet process. Evolution fielded multiple offers, and from the first bid to the final accepted price, valuation more than doubled. “Part of the moral of the story,” Kirk says, “is that if you can run a strong competitive process, you can really impact the valuation.”
The winning buyer was also, in many other ways, a good fit – and also the highest bidder. The consideration paid up-front was attractive and accounted for the majority of the deal. What remained was a meaningful number, the final piece of a transaction the founders had spent years building toward: an earn-out contingent on revenue performance over the following two years.
What remained to be settled
Following the original transaction, all parties would need to wait for an extended period of time for the earn-out period to be completed. The founders were on the sidelines – and their visibility into the financial reporting was limited, running as it now did through the buyer’s systems.
Time passed, and the period encompassing the earn-out finally arrived. It was time to attempt to settle the numbers.
When the buyer’s initial estimate of performance was shared, it included only summary information and fell well short of what the sellers were anticipating. Nonetheless, it might just well be the reality of the situation. That said, as is often the case following an acquisition, there were some gaps in the continuity of data from the period when the two companies’ systems were initially integrated. And there were some legitimate differences in opinion on how revenue should be recognized on various contracts during the earn-out period.
One of the founders took a lead role in working through the financial data and related analysis. She was part of a team that had spent decades building this company. She knew its customers, contracts, and history. Her gut said there might be a different answer that both sides would find reasonable.
Rather than accept an initial figure she couldn’t verify and felt had room for further resolution, she decided to hire someone to help her better understand what she was looking at – and to provide a credible counter-balancing opinion.
The earn-out was material – the final piece of the transaction – and it wasn’t going to be a simple analysis or negotiation. Every detail would affect the final number.
The gap the right advisor had to fill
Kirk’s team understood M&A. The founder understood her business. What they needed was a third voice, someone who could bring authoritative expertise on accounting treatment, work through a mountain of complex and incomplete data, and do so with enough credibility to be taken seriously when the arguments needed to hold. That’s what brought Dave Reeves into the room.
The large accounting firms could provide credibility, but the cost would have been prohibitive for a smaller project of this scope. Small independent accountants were more accessible, but something was missing. “I felt like there was a certain gravitas we wanted from a partner,” Kirk says, “because we knew we were going to have to make arguments around how revenue recognition was treated on a GAAP basis.”
He reached out to Jen Girard at CFO Selections. She connected him with Fractional CFO Consultant Dave Reeves.
The match
Dave is a career finance person, an investment banker, CPA, former Big 6 auditor, and for close to 20 years, the CEO and CFO of a software company that ultimately was sold in an M&A process. He joined CFO Selections doing fractional work for companies navigating significant financial decisions, many of them involving transactions.
When Kirk described the engagement, the alignment was precise. The company was a vertical SaaS business with a significant base of recurring contracts: annual licenses, hosted products, maintenance agreements. Dave had spent the better part of his career running a company with a very similar profile and in the same vertical. He recognized the business model, the revenue structure, the accounting issues that came with it. He also recognized the buyer’s profile, having navigated a sale to a similar type of acquirer at his own company.
“I had a good sense for this type of situation,” Dave says. “And, I understood a lot of the business and accounting issues that go along with this type of company.”
For Kirk, that specificity was exactly what the project required. “We needed a really strategic viewpoint, but also somebody who could get into the weeds on the accounting data. And somebody who could bring an authoritative accounting perspective to some of the revenue recognition issues we were going to face.”
The match was right.
The investigation
Dave came into the engagement with something the rest of the team couldn’t fully have: distance. He hadn’t lived the sale. He arrived with one clear objective: to find the right answer, wherever it led.
“Everyone on both sides acknowledged: we’re trying to get to the right answer,” Dave says. “Our side suspected there was incomplete data and there may be room for improvement, but if we get to an answer that says we haven’t hit the numbers , that’s fine. We’re looking for the right answer.”
Dave and the founder requested the source data for the underlying revenue. It came in raw form, requiring them to sort through an immense body of accounting records together to reconstruct and verify results — her knowledge of the business, his analytical rigor, line by line. Her familiarity and ability to access the right data was indispensable. She could look at a figure and say: that’s not what happened. Here’s what happened. He could ensure the right accounting framework was applied.
It wasn’t enough to just do it. They had to prove it.
Arriving at a final answer required a massive effort. The earn-out covered a substantial period of revenue, much of it inside a company whose systems the founders no longer controlled, without direct access to the buyer’s financials. Their visibility was limited. Re-assembling the pieces of a complex puzzle was the only way through.
What the founder did have was an encyclopedic knowledge of her recurring revenue base. These were annual software contracts with steady, familiar clients. She knew, with a high degree of confidence, what the revenue should look like.
Dave and the founder built a transactions database from the ground up, pulling invoices, credit memos, every piece of documentation they could request. A member of the founder’s extended team built tools to help structure the immense volume of data. Together they reconstructed the full revenue picture from first principles and assembled an itemized and defensible view of performance.
With this level of detail, they were able to identify several instances where a revenue transaction was miscategorized or applied to the wrong time period – inconsistencies that together made a material difference in the results. Many of these came from the period immediately surrounding the acquisition, when the two companies’ systems were being integrated: a time when it is common for items to be mishandled across different systems.
But perhaps the most critical issue involved the treatment of revenue recognition for some large customer contracts. The “correct” method to apply could legitimately be interpreted in different ways from different perspectives. Pre-acquisition, the company had a long-standing revenue recognition policy for these contracts. The central task was to make the case that the original approach was acceptable under GAAP. This required meticulous research, interpretation, and citation from Dave. This is exactly the kind of question a Big 6 auditor is trained to answer.
The supporting data assembled was comprehensive. The position on revenue recognition was fair and defensible. The expert opinion was credible and persuasive. Presented together, they made a case that was difficult to set aside. All parties reached a mutual agreement. The full earn-out was paid.
“It wasn’t good enough to just do it,” Kirk says – meaning, hit the performance target. “We actually had to prove it. That’s where we really needed Dave’s help.”
The founder had her own way of putting it. She called Dave the Puzzle Master. “Dave quickly became part of our team,” she says. “He was instrumental in helping us resolve a complex situation with a lot of moving pieces.”
“It was an investigation,” Dave says. “And it just so happened we were able to make our case.
It’s never easy to sort through a high-stakes situation where each party earnestly feels they are right and the impact is material But assembling the right team made all the difference. As Dave reflected later, “I think all three of us have fond feelings having gone through this, recognizing the strengths each of us brought to the process.”
