Today's buyout of Neiman Marcus follows last week's accounting restatement

Today’s announcement of Neiman Marcus’s acquisition by two private equity firms comes on the heels of an earnings restatement, hinting at existing problems that came to light through the suitors’ due diligence.

Last week, the luxury goods retailer announced it would amend its previously published financial statements, making “non-cash adjustments” to the company’s balance sheets and statements of cash flows. Apparently, the restatement stemmed from discovery of improper accounting of construction allowances provided by developers responsible for building new stores. According to a statement by the Neiman’s management, the company’s outside auditor, Deloitte & Touche LLP reclassified the allowances as deferred lease credits, rather than reductions of property and equipment.

What’s most interesting is sequence of events and the quick succession in which they occurred. At the time of the restatement on April 19th, Neiman’s management was presumably aware of the pending buyout offer, announced today by Texas Pacific Group and Warburg Pincus. The close succession of these events suggests that the parties involve were trying to avoid last minute issues that could thwart the buyout. What’s uncertain is who pressured Neiman into making the restatement: the company’s auditor Deloitte, or the private equity firms who acquired the retailer?

As the suitors, Texas Pacific and Warburg Pincus may have uncovered accounting problems during their due diligence, and wanted to avoid inheriting any scandals in the acquisition. It’s also likely that Neiman’s management, wanting to hold on to a generous offer of $100 per share, asked Deloitte to clean up any outstanding issues. Hence the tidy means by which they disposed of this issue – a curt reclassification of construction allowances without affecting previously stated or future projections for earnings, net income or earnings per share.

To skeptical eyes watching this acquisition unfold, the quick succession of events – accounting restatement followed closely by the buyout offer – looks a bit too contrived to be coincidental. This by no means suggests criminal malfeasance, but casts a shadow – albeit a short one – on the deal: what haven’t they disclosed or felt the need to restate?