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| Review of building products business |
Context / Scope of project
Our client was a building products firm that had significantly increased gearing during very profitable years in the sector. Unfortunately a down turn in the building industry coincided with increasing debt costs. The owners of the business and the debt providers were both keen to understand if it was still a good business and how long it would take to pick up. As PIP was not involved in the original commercial due diligence we were asked to conduct the review.
Outcome:
- Client and debt providers better understood the business outlooks and were able to renegotiate terms.
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What we did:
- Confirm (or not) that the positive differentiators of the business remain intact and the business model remains robust. (Utilising market surveys)
- Analyse the residential housing starts cycle (bottoming depth, timing of recovery, speed and substance of recovery etc)
- Explain the nature and timing of environmental changes in the building regulations and analyse the earnings uplift available to our client
- Determine the expected earnings potential as a result of residential market recovery to mid cycle levels and building regulations changes
- Do a quick review of future pricing of our client’s building products. In particular :
- Estimate market capacity versus demand
- Review market forces and competitor behaviour
- Review recent historical pricing up until today.
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