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Capability

Operational Due Diligence

We conduct a quick but thorough expert review of existing and prospective operating value and vulnerabilities of the target company, providing an edge in the buying process – avoiding “bad deals” and finding “hidden diamonds”. Our deep operations expertise enables us to identify issues and find value where others often can not. We incorporate our operations and industry expertise and a highly analytical approach to create the clearest picture possible of the target and a solid understanding of future operations requirements (e.g., investment, KPIs, skill base) to maximize value capture. We then offer pragmatic and value-driven recommendations to maximize investment potential and a top- level roadmap to jump start operations improvements post-acquisition.

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Customized Consumer Products Manufacturer
Validating Management's Operations Plan and Identifying Additional Savings at Customized Consumer Products Company

Identified $35-45MM in cost reduction opportunities, 2-3x management’s savings plan, giving our client an edge to win the auction. Despite very limited access to the target’s management, plants, and data due to the nature of the auction, Gotham was able to leverage dataroom information, a plant visit, and our relevant experience to build a solid fact base of the target’s cost structure – including a detailed 4-year line-item-level view of the operational cost structure and an analysis of 2,000-employee workforce linking each individual to the specific cost line in the cost structure – and to both validate and expand savings opportunities via a comprehensive outsourcing/consolidation model and an analysis of sales, marketing, customer service, and G&A costs.    

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Coffee Roaster and Distributor
Establishing Quick Read On Cost Savings at National Coffee Roaster and Distributor

Conducted 2-week operations assessment of target to establish initial read on cost reduction opportunities. Despite limited access to the target’s management, plants, and operations data, Gotham was able to create a clear picture of the target’s cost structure in both operations and its DSD network. While the cost reduction opportunities needed to achieve our client’s financial target did exist, capturing those savings posed significant culture and business strategy challenges. Given the high valuation of the target and the significant hurdles standing in the way of savings, the client leveraged our work to make a fact-based decision at the early stage of the process to exit the auction process.  

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Product Testing Services Provider
Rapidly Validating Margin Improvement Opportunities and Assessing Capacity/CapEx Risk at Testing Services Provider

Conducted 2-week operational due diligence to validate margin improvement opportunities and assess capacity/CapEx risk. Gotham visited 7 facilities and conducted full-day operations review with management to understand operations management approach/processes and visions/plans moving forward. To fill gaps in this data poor situation, we performed various in-depth analyses – recasting labor cost structure, analyzing job-level data to understand profitability, building a bottom-up labor utilization and fixed cost model to project margins with revenue growth, etc.  Gotham’s due diligence work enabled our client to move forward with confidence and successfully acquire target in a proprietary deal.  

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PROPANE DISTRIBUTOR
Determining Branch-level Margin Expansion Opportunities And Market Position

Conducted 2-week customer & market and operational due diligence to:  validate capture of pricing and operating efficiencies at acquired companies; establish local market dynamics and target’s competitive positioning; and assess regulatory and substitution threat. Gotham: surveyed ~750 propane consumers in target’s service areas; identified/profiled key competitors and conducted 32 competitor interviews in target’s local markets; analyzed zip-code-level propane supply, consumption, pricing, and heating degree day trends; determined pricing optimization and segmentation opportunity; assessed substitution threat from natural gas, electricity, and heat pumps; and analyzed pricing, delivery, and backoffiice expenses at 25+ acquisitions. Comfortable with the target’s opportunity to acquire family-owned local propane distributors and capture pricing/operations improvements, our client was able to move forward with an aggressive but well-informed bid.

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Dispensing Packaging Manufacturer
Validating Market Growth Outlook And Cost Savings From Consolidating Operations To Regional Hubs For Global Pressurized Dispensing Packaging Components Manufacturer

Conducted 2-week due diligence to validate sell-side estimates of market growth outlook and operational savings from consolidating 18 manufacturing facilities in 15 countries to 4 regional production hubs. Gotham undertook a comprehensive assessment of each operational initiative, including feasibility, changes to original plan, further opportunities, capacity dynamics, labor savings, material cost savings, overhead cost reduction, freight cost impact, CapEx, and one-time costs. Gotham estimated ~$15MM in total savings, 50% above the sell-side report and determined $12-13MM in CapEx/one-time costs. For market growth, Gotham conducted extensive research and interviews with industry participants to understand key product and packaging trends and built a bottom-up market model, projecting a 5.5% CAGR market growth (~2% lower than sell-side estimate). Our client pursued the target with a revised bid taking into account the lower market growth and the higher operational savings opportunity.

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Food, Personal, and Home Care Products Manufacturer
Rapidly Establishing Manufacturing Outsourcing Economics And Requirements At Family-owned Food, Personal, And Home Care Products Manufacturer

Conducted rapid operational due diligence to establish manufacturing outsourcing economics at a family-owned food, personal care, and home care products manufacturer. Gotham quickly:  built a bottom-up view of the target’s cost structure, current product costs, co-pack costs, and organization structure; conducted plant walkthrough and interviewed operations management; and interviewed companies in food and personal care products outsourcing. We established that outsourcing economics are slightly favorable as logistics and G&A would generate sufficient savings to more than offset a slight increase in food manufacturing cost. As our assessment indicated higher costs and risks associated with outsourcing food products, our client successfully pursued a restructured transaction of carving out personal and home care brands and products.

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Related Capabilities

 

Customer & Market Due Diligence

 

Post-Merger Integration/ Carve-Out Planning

 

Rapid Operations Improvements

 

Sales & Marketing Effectiveness

 

Pragmatic Growth Strategy

Industry Expertise

 
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Consumer
 
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Food & Beverage
 
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Healthcare
 
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Industrials
 
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Energy
 
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Services

Want to learn more about how Gotham can help you with value creation?