The company was under pressure as the acquisition process brought strict audit prerequisites.
Key takeaways
Streamlining data and addressing revenue recognition model challenges were key.
Hands-on support and technology industry insights played an important role.
An AI-driven software company recently faced a critical juncture: preparing for a more than $1 billion acquisition by a major strategic buyer. The stakes were high, with the future of the company and their leadership riding on meeting rigorous audit requirements and presenting reliable financials. To navigate this challenge, the company turned to RSM US LLP, leveraging its advisors’ experience in audit and exit readiness, revenue recognition, and technical accounting for technology companies.
The AI software company, which provides tailored solutions for enterprise clients, found itself under pressure as the acquisition process introduced strict audit prerequisites. While the company had engaged RSM previously for various projects, the urgency and complexity of the acquisition demanded a deeper relationship. Internal constraints, such as limited staff bandwidth and technical accounting knowledge, compounded the challenge. With the letter of intent from the buyer listing audit completion as a closing condition, the clock was ticking for the company’s leadership team.
Technology industry insights
Technology companies often operate with highly customized pricing models and rapidly evolving product offerings. In this case, the company’s pricing structure was neither standardized nor based on conventional per-seat software models. Instead, deals were tailored for each client, resulting in significant variability in contract terms and revenue streams. This complexity posed unique hurdles for revenue recognition and audit preparation, as traditional approaches and criteria did not fit the company’s business model.
RSM’s team recognized these nuances early in the engagement. Rather than applying a generic framework, advisors took the time to understand the company’s operations, working closely with internal stakeholders to identify the right criteria for establishing stand-alone selling prices across disparate product groups and contract types.
As the former chief financial officer of the software company describes it, RSM's existing industry background and understanding enabled the project to move ahead swiftly.
“We didn’t have to waste time we didn’t have on explaining our industry,” he says. “We also didn’t have to explain the nuances of the revenue recognition model; the RSM team just got it.”
The RSM team continued to ask the right questions that maybe we didn’t know to ask. That helped us identify where the data gaps were and allowed us to address them.
Former chief financial officer, AI software company
Revenue recognition: Overcoming data challenges
One of the most pressing challenges was developing a reliable revenue recognition model that would stand up to audit scrutiny and satisfy the buyer’s requirements. Problems the company needed to solve ahead of the deal included:
- Historical data reliability issues
- Existing resource bandwidth
- Complexity in the company’s pricing and revenue recognition requirements
More specifically, the company’s internal team lacked the specialized knowledge to define stand-alone selling prices and recast historical revenue data accurately. RSM provided guidance, leading the process through several iterations to identify statistically valid samples and suitable methods for categorizing products and services.
A breakthrough came when RSM proposed bundling products into logical groups and segmenting data based on hiring ranges—a dimension that provided meaningful buckets for analysis. With this approach, the team was able to generate robust sample sets and build a defensible model for revenue recognition. This practical, data-driven strategy gave company leaders increasing confidence for a successful outcome, even before the solution was officially in place.
“The RSM team continued to ask the right questions that maybe we didn’t know to ask,” the former CFO says. “That helped us identify where the data gaps were and allowed us to address them.”
Data streamlining: Transforming the organization's informational backbone
For any technology enterprise, the quality and consistency of data are foundational to reliable accounting and exit readiness. The AI software company’s legacy data, in particular, had issues as a result of product and pricing changes over time. Missing elements, inconsistencies and manual errors created complications for both revenue recognition and other critical areas of technical accounting. RSM’s team worked to clean and standardize the data through automation and manual updates where necessary.
This hands-on support proved invaluable, as it enabled the company to meet audit requirements and present a clear, accurate financial picture to the buyer. RSM’s ability to navigate complex datasets and resolve technical accounting challenges—such as lease accounting under ASC (Accounting Standards Codification) 842, complex equity instruments, and capitalized commissions—was critical to the deal’s success. RSM also supported the client through annual audits and quarterly financial reporting reviews required as part of the transaction, helping the company overcome what could have been deal-breaking obstacles.
Through all that work, RSM’s consultative approach made the engagement feel like a true team effort, the CFO says.
“The team that we were working with cared as much about our success as we did, and they were willing to put in whatever was needed to make sure we got there,” he says. “We felt like one team driving toward a common goal, and it did not feel like a vendor relationship.”
A successful outcome and 'a tremendous relief’
The industry-informed work to streamline the company’s data, address revenue recognition model challenges and meet other buyer requirements ended in success; the transaction recently closed. Ultimately, under time pressures, the company not only met the audit requirements for acquisition but did so with confidence in their financials and processes.
The former CFO attributes the project’s success in part to the RSM team’s mindset and approach to solving problems.
“We had some very late nights, and the team’s enthusiasm to get us through it—and with positive attitudes—was very meaningful,” he says. “There was so much at stake—and once we reached the feeling that we were actually going to get through it, it was a tremendous relief.”
Related services
