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| Wooden products manufacturer |
Context / Scope of project
Our client was a $300m private equity fund wanting to invest in a business that manufactured and sold wooden products. PIP was asked to conduct commercial due diligence on the business and also operational due diligence on its manufacturing operations.
Key Insights:
- Strong volume growth going forward
- US sub-prime crisis likely to have limited impact due to different product characteristics of US manufacturers, and potential for “trading down” to target’s product
- High risk related to customer concentration
- Well organised Asian facility now “stabilised” after several years. Likely to deliver 30% cost advantage with 2-3 year “first mover advantage” versus competitors
- Additional 15% cost advantage available from chasing 30% volume improvement
- A number of material improvement opportunities, primarily reducing wastage.
Outcome:
- Client did not invest in the business
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What we did:
- Standard CDD for investment committee and banks
- Evaluation of Asian operating facilities
- Provided focused insight into key market drivers, dynamics and outlook
- Interviewed numerous competitors and customers about the industry and the target
- Toured the manufacturing plants and interviewed staff.
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