Using Commercial Due Diligence To Negotiate Better - Advantage
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“Fiducia Limited and its affiliates exclude all liability for any damages and losses arising out of or in connection with this presentation. The information is for general guidance and does not replace specialised advice. Copyright © 2013, Fiducia Limited. All rights reserved. E&OE” Using Commercial Due Diligence To Negotiate Better Stefan Kracht Fiducia Management Consultants October 18 th , 2013 For:
Transcript of Using Commercial Due Diligence To Negotiate Better - Advantage
“Fiducia Limited and its affiliates exclude all liability for any damages and losses arising out of or in connection with this presentation. The information is for general guidance and does not replace specialised advice. Copyright © 2013, Fiducia Limited. All rights reserved. E&OE”
Using Commercial Due Diligence To Negotiate Better
Stefan KrachtFiducia Management Consultants
October 18th, 2013
For:
Agenda
Section Page
Fiducia Management Consultants 3
Why Commercial Due Diligence 5
Case Studies 9
Q & A 13
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Based on reliable commercial advice and practical support, we work with industry leaders to make the right strategic growth decisions in this fast-changing market.
What we can do for you
1. Market Mapping and Industry Analysis:
Size and segmentation
Competitive landscape
Best practices and business modelling
2. Growth Strategy Development:
Location analysis
VOC and demand analysis
Strategy design
Organisational improvement and implementation support
3. Mergers & Acquisitions:
Identification and screening of targets
Negotiation support
Due diligence
4. Supply Chain Analysis and Restructuring:
Supply chain analysis
Supplier search and evaluation
Core Services
Market MapsSupply Chain
Analysis
M&A Support
Strategy Development &
Realisation
China Consulting Practice
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Agenda
Section Page
Fiducia Management Consultants 3
Why Commercial Due Diligence 5
Deal Process and CDD Purpose
Scope
Key Success Factors
Case Studies 9
Q & A 13
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CDD - Deal Process and Purpose
Within the deal process, clients use CDD to investigate a target in terms of its strategic, commercial and organisational capabilities relative to its market.
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Commercial Due
Diligence
Buyer and Seller
Meeting
Market Mapping & Target Search
Deal Structuring & Negotiation
Financial & Legal Due Diligence
Closing
Confirms basic interest on both sides and further strengthens the partnership
with the target
Optimises buyer’s tactics and negotiation power
Reduces transaction risk and limits liabilities
Results in a practical and realistic plan for post-acquisition integration including
agreement on complementarity and synergies
Scope
Commercial due diligence focuses on the following internal and external factors in order to ascertain the viability of the target post-acquisition.
1. Organisation (& ownership) – understand organisational setup; profile key stakeholders and decision-makers
2. Strategy – assess the company’s current strategy and ability to drive sustainable growth
3. Sales & Marketing – review distribution setup and sales performance
4. Operations – assess reliability of supply chain
5. Staff – evaluate workforce quality (HNTE)
6. Financials – probe gaps between commercial and the “official” data
7. Relationships - understand relationships with government agencies
AimsFactors
Target
6. Financials
5. Staff4.
Operations
3. Sales
2. Strategy
1. Organi-sation
Internal
7. Relation-
ships
External
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Key Success Factors
CDD is not only essential in providing information for successful transactions, but sets the groundwork for the post-acquisition business plan and relationship.
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WHAT -Ground Rules
WHO -Role Mapping
WHEN -Working Schedule
Critical Success Factors
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2 3
Ensure discussions encompass all levels of the target
Familiarise yourself with the relevant people
Convince target of your seriousness and assure cooperation in interviews and data room set-up
Define priority topics and deadlines
Facilitate your internal approval process
Assure target understands process
Explain reasoning of investigation
Highlight dangers of manipulation
Assure the benefit of cooperation to confirm post-acquisition synergies
Deal Breakers Define when to walk away Get funds committed and
invest in alternatives
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Agenda
Section Page
Fiducia Management Consultants 3
Why Commercial Due Diligence 5
Case Studies 9
Q & A 13
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“Fiducia Limited and its affiliates exclude all liability for any damages and losses arising out of or in connection with this presentation. The information is for general guidance and does not replace specialised advice. Copyright © 2012, Fiducia Limited. All rights reserved. E&OE”
“Due Diligence in the Metals Industry”
Case Study 1/2
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Project Introduction
Fiducia advised the global leader in explosion cladding on entering China via acquisition.
Fiducia’s ApproachClient Background The client is a global producer of metals Based on Fiducia’s market map and acquisition target
search, the client decided to acquire the target werecommended
The client assigned us to carry out a commercial duediligence of the target
Assignment Assess the feasibility of acquiring the target Understand the shareholder structure, operational
capability, business sustainability and reputation inthe market
Facilitate negotiations Advise on the post-acquisition strategy
Conducted primary research including: Internal interviews with the target’s shareholders
and management team External interviews with main customers, suppliers,
local communities, government agencies andassociations
Cross-checked inconsistencies between the internaland external interviews and identified potential risksand post-acquisition challenges
Photo source: Fiducia
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Project Results
Fiducia recommended the client proceed with the acquisition, highlighting the main risks and proposing a negotiation roadmap.
Existing setup (facilities, shooting sites, permits andcustomers) provides a sound basis for the client’sChina operations
Target held critical soft strengths including sufficientin-house technical know-how and strong localgovernment relationships
Final negotiations should focus on risks andchallenges such as financial inconsistencies, rawmaterial supply and recruitment of new management
Fiducia’s findings enabled the client to pursue theacquisition
With a clear understanding of the risks involved, theclient was able to optimise its tactics and positionduring the acquisition negotiations
Project FindingsTarget Positioning
Results
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Direct Competitors
Fringe Competitors
Xi’an Tianli
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Al Clad / SS Clad
Volu
me
(k T
on
s)
Product Focus
Target
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16
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Al Clad Ti / Non-ferrous Metal Clad
xx
xx
xx
xx
xx
xx
xx
xxTechnical Gap
Agenda
Section Page
Fiducia Management Consultants 3
Why Commercial Due Diligence 5
Case Studies 9
Q & A 13
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FAQ – Discussion Points
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2 3
What is the difference to FDD?
Where in the value chain are
most acquisitions?
What keeps you awake at night
during deal negotiations?
Assessing quality of management
team?Deal timing?
Caterpillar-SiweiUSD580m
writedown?
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4
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What Is Your Next Move?
Visit our homepage: www.fiducia-china.com
Shanghai
Tel: (+86) 21 6327 9118Fax: (+86) 21 6327 9228 Email: [email protected]
Hong Kong
Tel: (+852) 2523 2171Fax: (+852) 2810 4494Email: [email protected]
Shenzhen
Tel: (+86) 755 8328 9958Fax: (+86) 755 8328 9959Email: [email protected]
Fiducia Management Consultants – Providing China Insight Since 1982
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