Commercial Due Diligence and Valuation

Challenge

An industrial manufacturing company was evaluating a acquisition of Home AC division of a global air conditioning and EPC player to diversify its product portfolio. They required support for commercial due diligence, synergy assessment, business valuation and risk assessment before proceeding with the transaction.

Approach

1. Conducted commercial due diligence, assessing the Home AC market’s size, growth trajectory, and industry fundamentals, including pricing trends and the impact of regulations.
2. Conducted preliminary financial due diligence, supplier assessment and made EBITDA adjustments for valuation
3. Worked with supply chain, production engineering and HR teams to evaluate procurement, CapEx and HR cost synergies.
4. Developed an integrated three-statement financial model and valuation of the target business to support LOI and process-letter submissions.
5. Incorporated seasonality adjustments in projections given the cyclical nature of the AC business. Built separate lean-season and peak-season financial projections, capturing the working capital swings, inventory build-up ahead of peak season, and revenue concentration risk.
6. Stress tested the valuation and investment case against key variables, including summer and winter season demand variability, raw material (copper, steel) price movements, and pricing to understand the downside risk.

Impact

1. Enabled an informed investment decision through an objective valuation and commercial assessment.
2. Identified key risks and prepared mitigation plan.
3. Strengthened the negotiation strategy with data-driven insights.
4. Provided a clear understanding of the target’s long-term growth potential.