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ACQUISITION ANALYSIS
BACKGROUND
- A private equity client was pursuing an add-on acquisition
- The seller requested a 6x multiple on a $3 million EBITDA
INITIATIVES
- We implemented a Pre-Acquisition Analysis project to add an operational component to their acquisition team
- Specific goals were to identify latent value, hidden risks, and any other issues that could impact the decision to acquire or the transaction negotiation
RESULTS
- We identified a pattern of pre-building inventory that adjusted “true” EBITDA by almost $1 million. As a result, our client negotiated a $5.5 million reduction in the price of the company.
- We identified operational opportunities to improve the value of the investment after the acquisition, including:
- $4 million in specific opportunities to reduce working capital needs through improved inventory management procedures.
- $2 million in additional EBITDA that would proceed from some operational and production scheduling changes.
- We helped our client identify and assess risks related to existing plant practices, margin deterioration, aging equipment, obsolete and unsaleable inventory, and pending capital expenditures.
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