Case study

Pre-Deal commercial diligence to validate market growth potential & integration complexity

Client

Leading Canadian public utilities organization serving 1,800 square miles and 15+ communities

Impact

Target acquisition company generating $50 million of consulting services revenue to global utilities industry and forecasting 3 year revenue acceleration to $150 million.

Issue

Acquirer is being asked to pay a premium vs market and is struggling to gain consensus within investment team given non-core business activities and potential integration complexity.

Approach

Our commercial diligence focused on past 3 year CAGR, customer segmentation, revenue & profitability by service solution, competitive & market analysis and 3 year growth assumptions, including resourcing and utilization levels.

Outcome

Our commercial diligence uncovered a number of key findings to support the investment team in their decision making process including; based on 3 year CAGR of 7% target would need a change in annual growth rate of 25% plus to achieve forecast, net margins of 11%, $50 million plus resource investment over 3 years, toxic culture match, legacy technology infrastructure requires full digital transformation process.