Case Studies
We want to give you a flavor for some of the deals we’ve worked on in the past.
We also want to give you a feel for some of the challenges involved with each of these business situations.
➤ Sale of plastics recycling company in Florida
This was a company in Florida that recycled post-consumer plastic waste into new products that could be used by niche players with special requirements in the materials handling industry. The company had developed proprietary processes (using technology different from the traditional injection molding process) that allowed them to accept a very broad range of types and classifications of post-consumer waste, thereby significantly reducing the pre-processing sorting costs.
CHALLENGES – The CEO had quit unexpectedly and in unfavorable terms. His staff was running the business as best they could given their professional backgrounds and skillset, but the business was losing money and cashflow was negative.
As a precursor to the sales process, part of this project turned into finding a CEO with the right professional background and industry experience. Needless to say, this part of the project would have been an assignment that would have traditionally been handled by an executive recruiter. Since I believe in going the extra mile and time was of the essence, I worked on this directly. Through a formal and structured search process I was able to find just the right executive in Minneapolis. In this particular situation, identifying new leadership was seen as an enabler and facilitator for consummating a sales transaction.
➤ Sale of factory in Central New York
This was a factory in Central New York that made electrical and electronic products integrated by other manufacturers into their capital equipment. The company specialized in mid to low-volume production, with high-technology, high-quality, and short lead times.
CHALLENGES – This transaction was part of a bigger corporate restructuring. The facility was originally acquired by a large and acquisitive corporate parent as a “second level” acquisition imbedded in a larger deal, but was not a good strategic fit with its new parent. Because of the specialized nature of the facility, its technologies, and its products, identifying potential buyers was a challenge. In addition, the facility was located in Central New York, a geographic location with high wage costs and benefits, as well as significant regulatory burdens. This last point was a significant hurdle to overcome with potential buyers, especially when you consider that the industry had migrated to lower cost locations like China and Mexico. Further, relocation of the facility would not have been an easy option for a new buyer, given the high-mix/low-volume nature of the business.
➤ Acquisition of contracts electronics manufacturer in the Dominican Republic
This was a buy-side representation in which an OEM of computer hardware wanted to acquire a contracts electronic manufacturer. (I am a native speaker of Spanish, so this facilitated the interaction with my counterparts in the Dominican Republic.) The acquiring party wanted to use the contract electronics manufacturer to off-load some of their older and more labor-intensive products into a lower labor-cost location.
CHALLENGES – The contracts electronic manufacturing business is famous for its low margins and customer volatility. Customer relationships are very fickle and extremely price sensitive. The rapid pace of product redesigns and standardized manufacturing processes reduce switching costs and customer loyalty. In this context, it was imperative to get a good understanding of the business relationship between the contract electronics manufacturer and its customers. This was a high-technology business with sophisticated process and very expensive manufacturing equipment. Part of the challenge inherent to the acquisition was to understand the manufacturing and quality processes, and the technological development roadmap. Further, we had to ensure that these items aligned and provided synergy to external customers, in addition to the acquiring party. Finally, inventory control was an area of intense focus because: (1) ownership of raw materials came in different versions, in some cases being owned directly by the contract electronics manufacture, and in some cases being owned (through various direct and indirect arrangements) by the customer of the contract electronics manufacturer; (2) there was a very large and varied number of small components, which complicated record keeping and material movement transactions, thereby motivating and facilitating inventory discrepancies; (3) and finally, inventory valuation was a very significant component of the cost structure.
➤ CNG Truck Refueling Stations
This was a potential deal that did not finalize; but, I mention it because it allowed me to gain a first-hand insight into the trucking industry. The client wanted funding to start a national network of CNG truck refueling stations. He had already built several local “demo” stations that were operational and profitable.
CHALLENGES – CNG for trucking is somewhat of a chicken and egg problem. A national network of CNG refueling stations is not built, because there are not enough trucks running on CNG. There are not enough trucks running on CNG because there is no national network of refueling stations. Similarly, efforts by truck engine manufacturers to provide large high-capacity CNG truck engines have been erratic and inconsistent, at the same time that they have continued to make significant investments in technology to improve the gas mileage and efficiency of traditional diesel engines. Converting a trucking fleet to use CNG is a very nuanced decision process. At first glance, the cost-savings related to using CNG instead of diesel are very alluring. However, there are some subtle trade-offs in terms of conversion cost, range, payload, and power that in a lot of trucking applications may aggregate to more than offset the potential cost savings in fuel. Finally and further complicating this particular business situation, the client was more interested in “evangelizing” about the potential benefits of CNG than in building a world-class business based on hard-nosed financial metrics and objectives.