Lindsay Goldberg Faces Austrian Probe Over Alleged EBITDA Manipulation

Lindsay Goldberg is facing scrutiny from Austrian authorities over allegations that the firm artificially inflated EBITDA figures leading up to the 2021 exit of Austrian packaging company Schur Flexibles.

A previous attempt to sell Schur in 2019 fell flat: internal documents from sell-side adviser Goldman Sachs described skepticism from potential buyers Platinum Equity and Cinven, who raised concerns about Schur’s rapid EBITDA growth, lack of supporting financial data, and excessive adjustments to EBITDA. But, after temporarily pausing the process, Lindsay Goldberg eventually reached a deal to sell Schur to Austria-based investment firm B&C Group in 2021 for more than €900 million.

Shortly after the deal closed, B&C uncovered what it says were substantial financial irregularities. The firm accused Schur’s management of deliberately inflating EBITDA by improperly capitalizing a range of expenses, including bonus payments, consultant fees, machinery maintenance, and new hire relocation. Filings also claim that certain unrelated losses had been added back as part of an adjustment for discontinued operations.

A subsequent forensic accounting investigation led by KPMG agreed with B&C’s initial read and revised downward Schur’s 2020 EBITDA by two-thirds. KPMG also recommended similar revisions for 2018 and 2019 financials.

B&C alerted lenders to its concerns, which led banks to promptly pull Schur’s lines of credit. The resulting liquidity crises forced B&C to hand over the keys to a creditor group led by Apollo Global Management, wiping out its $300 million equity investment within a year.

B&C has since managed to recover around half of its losses through insurance claims and is pursuing additional compensation from Lindsay Goldberg.

Lindsay Goldberg denies any wrongdoing and says B&C was fully aware of Schur’s financial position when it bought the business. Schur Flexibles’ “financial statements were audited and signed off by PwC, one of the ‘Big Four’ accounting firms,” a spokesman for Lindsay Goldberg told Bloomberg. “B&C conducted extensive due diligence before taking control of Schur, knew and understood how the company calculated and reported EBITDA, and proposed an above-market valuation of Schur in anticipation of a large windfall through an expedited IPO process.”

When asked in his deposition about market concern with Schur financials from the failed 2019 sale process, Lindsay Goldberg managing partner Michael Dees said the situation was simple: “Potential buyers had one view of adjusted EBITDA, we had a different view of adjusted EBITDA.”