A $25 Million Education in M&A Crisis Management

A “Slam Dunk” Deal and the First Red Flag

I got the call in 2006 about an opportunity that seemed almost too good to be true. A company, a genuine pioneer in online medical prescriptions, was on the cusp of a major exit. They’d survived the dot-com crash, which was no small feat, and had just secured a $100+ million offer to be acquired by a healthcare giant. For a startup of that era, this was the definition of a success story.

The company’s prestige was undeniable. Their board included heavy-hitters like the Chairman of a major e-commerce service. On paper, the company was a rocket ship—a first-mover with a blue-chip board and a life-changing acquisition on the table. Any financial executive would want to be part of that story.

But the initial request from the COO had a strange tone. He said they needed a CFO to come in and “babysit” the M&A process and the audit. The financial statement audit was a requirement of the seller, as they were a fortune 500 public company. That word, babysit, stuck with me. Why would a company weeks from a nine-figure deal need a babysitter for a process that should be routine? My guard was up immediately.

Then came the reason: their VP of Finance was resigning. She was leaving, I was told, for her “dream job.” That’s when my internal alarms started blaring. It made no sense. Staying to close a $100+ million acquisition is the crowning achievement for any finance leader—it is the dream job. To walk away before the finish line wasn’t just unusual; it felt like someone jumping from a ship they knew was taking on water.

I didn’t hide my skepticism. I told the board point-blank that this was a major red flag. But they were confident, almost dismissive of my concern. They reassured me that a Big 4 firm was already engaged and that the audit was a “slam dunk.” My role, they insisted, was just to oversee the final steps and help with projections. The hard work was done; they just needed a steady hand for the last mile.

So, trusting the board’s confidence but keeping my instincts on high alert, I took the assignment. It was a premier company with a great story. I walked in on that first day ready to get up to speed. The departing VP’s financial reports looked beautiful—polished and professional. But within the first few hours, I noticed something unsettling. The clean, high-level numbers in her reports didn’t seem to tie back to the underlying details. It was as if the reports were elegant estimates, built for show rather than rigorous accounts built on fact. The calm before the storm was beginning to feel ominously quiet.

“This Company Is Not Auditable”

I showed up on a Thursday to get a handoff from the VP of Finance. Her last day was scheduled for that Friday. The atmosphere was tense, but it was the tense energy of a big deal closing, not the panic of a looming disaster. At least, not yet. When I came in the following Monday, it was time to meet with the auditing firm. The introduction to the partners was brief. They stated, in clear, unequivocal terms, that the company was not auditable. And then they resigned. Just like that. 

In the wake of the chaos, I had to diagnose the problem. The auditors said “unauditable,” but what did that mean in practice? It meant everything.

• Nothing was reconciled. Not the bank accounts, not the accounts payable, nothing. The books were a collection of entries that lived in isolation.
• Revenue was a mirage. While the final revenue number turned out to be materially correct, it was completely unsubstantiated. There were hundreds, maybe thousands, of contracts, but revenue wasn’t recognized based on GAAP rules and there was no trail to prove any of it. The beautiful reports were works of fiction because they were based on what the VP felt the numbers should be, with no way to tie them back to actual, verifiable data. We had to redo seven years of accounting just to prove the number was right.
• There were no internal controls. The “accounting department” was a bookkeeper who didn’t know GAAP and a sharp but green Accounting Manager, who had been ringing the alarm bells for months but had no authority to fix the problems.

The root cause was a culture that had zero respect for finance and accounting. This was a classic case of a tech startup that celebrated product innovation and big-name board members while treating the “back office” as an unimportant cost center. They had prioritized growth over governance, and now the bill was due.

The board was threatening to sue the auditing firm. The bankers were freaking out. The acquisition deal clock was ticking loudly. And I was standing there, less than a week into the job, facing a mountain of problems that stemmed from the company’s founding in 1999. We had to rebuild seven years of accounting, from the ground up, in a matter of weeks. The rocket ship was built on a foundation of sand, and it had just collapsed.

The Salvage Operation

After the dust settled from the auditor’s exit, the panic in the room was palpable. The board was calling, the bankers were frantic, and the acquisition timeline was now a ticking time bomb. I knew I had one shot to take control of the situation.

My first move was to get everyone on the same page. I gathered the key stakeholders and was blunt: “I’ve been here for four days. This problem wasn’t created on my watch, but if you want me to fix it, you need to give me your full support and get out of my way. No second-guessing, no interference.” The alternative was watching the $100 million deal vaporize completely.

The scale of the problem was breathtaking. We couldn’t just fix the current year; we had to rebuild the financial records all the way back to 1999 to ensure everything carried forward correctly. We set up a “war room” and dug in.

The single biggest hurdle was revenue recognition. We had to hunt down every single contract—numbering in the hundreds—and apply the correct GAAP principles to each one. It was tedious, painstaking work. But in that war room, I found my most valuable ally: Nancy, the internal Accounting Manager. She had been frustrated for months, knowing things weren’t adding up but powerless against a VP who dismissed her concerns. She knew where all the bodies were buried. Together, we became the nerve center of the operation. I provided the strategy, the authority, and the framework; she provided invaluable institutional knowledge.

For six weeks, we lived in that room. We worked 100, 120 hours a week. It was an all-hands-on-deck effort, a total of nearly a thousand hours of work poured into untangling years of neglect.

Managing the healthcare giant during this time was a delicate dance. We had to be transparent enough to maintain their trust but confident enough to prevent them from bolting. We communicated that we had identified the full extent of the problems and were executing a rigorous plan to correct them. The message was: “What we present to you will be the truth.”

The final, crucial step was finding a new auditor. No other Big 4 firm would touch us after the initial firm’s very public exit. My pitch to a regional firm was straightforward: “The mess has been cleaned up. We have done the hard work for you. You will be auditing a set of books that are now accurate and complete.” It was a testament to the quality of our salvage job that we convinced a reputable firm to come on board. After six weeks of sheer intensity, we had finally produced a set of financial statements that were not just presentable, but actually true.

Lessons Learned at a High Cost

After six weeks of brutal, round-the-clock work, we had pulled off the impossible. We had taken a company declared “unauditable” and delivered a clean set of books. The deal could proceed. But even heroics, as I learned, have a price.

The delay and the fact that we no longer had a Big 4 auditor gave the healthcare giant significant leverage. They came back with a revised offer: $75 million. The accounting failure, pure and simple, had cost our shareholders $25 million. That was the tangible price tag for years of neglecting their financial foundation. It was a staggering, sobering number. While the sale was ultimately a success—$75 million is still a life-changing outcome—it will always be remembered by me as the deal that left $25 million on the table.

For me personally, the most stressful moment wasn’t when the auditing firm walked out; it was about two weeks into the triage. The mountain of work seemed insurmountable, the timeline was suffocating, and the pressure from the board was immense. I had staked my reputation on the belief that this could be fixed. In those quiet, late-night hours, the weight of that responsibility was immense.

The fallout for the previous leadership was minimal, which is often the case. It was written off as a “costly mistake.” The VP of Finance had already exited stage left. The board, once threatening to sue the auditing firm, was now just grateful the deal hadn’t completely collapsed. They were incredibly appreciative of my efforts, but the episode highlighted a common and frustrating dynamic: the people who create the crisis are rarely the ones who have to face the consequences.

But there was a profound silver lining, one that meant more to me than any board thank-you. Years later, around 2016, I was in San Francisco with colleagues and I ran into Nancy. The frustrated Accounting Manager from the war room was now a successful CFO herself. She told me, “DJ, you’re the reason I stayed in accounting. You showed me what good looks like and that finance could be a force for integrity.” That moment was worth more than any fee. It was a reminder that leadership in a crisis isn’t just about saving deals; it’s about protecting and inspiring people.

The Universal Lesson

If I could give one piece of advice to every startup founder and board member, it would be this: Respect the numbers from day one. Finance and accounting are not a “back office” function; they are the bedrock of your company’s credibility and value. You don’t know what you don’t know, and the cost of finding out is always exponentially higher than the cost of hiring the right expertise upfront.

Hire a qualified financial leader early. Build a culture where financial integrity is non-negotiable. Because a beautiful product and a star-studded board mean nothing if your books are a house of cards. Eventually, someone will need to open the doors, and the whole thing will collapse. I know, because I was the one who had to walk in and start the painful, expensive work of rebuilding.