Establishing Long-Term Forecasting and Annual Budgeting to Support a SPAC Transaction
The Situation
One of the fastest growing Medicare Advantage insurance providers was planning to go public through a traditional IPO process. The Company’s finance team was lean, and they required assistance developing a three-statement investor model with a 5-year company outlook and a 13-week cash flow forecast model to help manage the operations of the business. At the start of the project, the Company was approached by investors to go public through a SPAC transaction which accelerated the timeline for select deliverables and created additional workstreams.
Services
Budgeting & Forecasting Process Improvement
IPO Readiness
13-Week Cash Flow Forecasting
The Execution
- Worked with strategic finance, actuary, and select operational cost center leaders to establish the Company’s key business drivers.
- Built a robust five-year, three-statement forecast model which included a detailed membership growth and market penetration analysis. The model was constructed based on Medicare Advantage economics and captures MER, risk score, PMPM metrics, and other items by geographic cohort.
- Ensured that the forecast model facilitated and enabled an investment decision by the SPAC sponsor under a highly accelerated timeline.
- Iterated on the model and validated assumptions between LOI and signing of the agreement with the SPAC sponsor:
- Stress tested assumptions vs. key industry benchmarks.
- Built a lifetime value per customer-to-customer acquisition cost (LTV/CAC) analysis.
- Used the forecast model to support the projections included in the S-4 filing upon finalization.
- Utilized 2021 projections from the investor model and operationalized into a detailed 2021 budget model to ensure consistency in projections:
- Created standardized data input templates at the individual employee and vendor level for each cost center.
- Conducted detailed review sessions with each cost center leader to ensure alignment with the assumptions in the long-term forecast.
- Structured the income statement by general ledger account for easy upload into the Company’s accounting system.
- Reviewed and analyzed cash receipts (mainly driven by capitated payments from CMS) and disbursements to build a 13-week cash flow forecast model with dynamic drivers and update capabilities.
The Results
To meet tight deadlines for a SPAC merger transaction, Accordion helped a leanly staffed finance team move with speed and flexibility to accomplish all required tasks. Our team partnered with the CFO and FP&A function to a) facilitate agreement between company management and new investors on a long-term growth plan; b) work with operational leaders to build a detailed 2021 budget that aligned with the company’s long-term objectives; and c) implement a weekly mechanism to monitor and optimize cash flow.