CLIENT
Private Equity
ACTIVITY
Subsea Oilfield Services Company
KEY ISSUES:
A consortium of private equity backers were in the process of buying the subsea division of a large manufacturing corporation. They were concerned that the purchase price had been inflated to include a major machine tool investment programme.
The key role of the business review was to assess whether the extra investment was delivering the sellers claims. A financial due diligence exercise would not be able to assess the potential upside or shortfall of such an investment. Only an operational business review would be able to show the impact that this had on manufacturing performance.
THE APPROACH:
The operational business review analysed the extent to which new machinery was being planned and managed. The results of this analysis could then be compared against the financial model that the sellers had put forward and the differences quantified financially.
THE OUTCOME:
The results of the business review showed significant operational underutilisation of machinery due to deficiencies in planning and managerial processes. Most of the issues were relatively straightforward to remedy once the transaction had been completed.