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| Heavy equipment hire company |
Context / Scope of project
Our client, a leading global private equity firm, was looking to make a final go/no go decision on the acquisition of an Australian Heavy Equipment Hire company. While the buyer had received and analysed extensive financial and operational information on the target, further information and analysis was needed to make a final decision. In particular, the period of forecasts provided by the target’s management did not match the investment horizon of the buyer, and better insight was needed on the medium-term strategic opportunities in each of the target’s distinct operating divisions.
Key Insights:
- Target positioned to maintain strong double digit revenue growth throughout the investment horizon
- Strong growth potential in two out of three core business segments
- Current asset fleet generates greater revenue per asset with lower operating/maintenance cost versus key competitors’ older, less flexible fleet.
- Target’s growth is outpacing that of key competitors
- Well positioned to achieve rapid growth through product and geographic expansion
- However facing significant challenges to future growth
- Segment competition is highly fragmented and facing slowing growth
- Ageing fleet may limit the profitability of the business segment
Outcome:
- Our client acquired the business.
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What we did:
- Executed a comprehensive, 4-week commercial due diligence of the potential acquisition target
- Assessed forecasts of turnover and EBITDA margins provided by the target’s management and extended the time horizon of the forecasts to align with the buyer’s investment horizon
- Conducted extensive research into each segment - through expert interviews, company data, management meetings, market reports and publicly available materials – to forecast segment structure, dynamics and growth, identify key competitive success factors, competitors, and trends
- Assess the target’s competitive position in each segment – estimated competitor profitability, market share, and strategic direction
- Documented key risks and strategic opportunities that may exist within its core, or close adjacency markets. Estimated the potential impacts on those risk/opportunities
- Identified operational improvement opportunities in the target business and estimated the impact of those improvements
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