Commercial Due Diligence & Business Valuation
Challenge
The client a 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. Commercial due diligence – Assessed the Home AC market’s size, growth trajectory, and industry fundamentals, including pricing trends and the impact of regulations.
2. Synergy assessment with client functions – Worked with the client’s supply chain and HR teams to evaluate procurement synergies, HR cost synergies and CapEx synergies.
3. Integrated financial modeling and valuation – Built an integrated 3 statement financial model for the target business and valued business using multiple valuation methodologies.
4. Seasonality-adjusted 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.
5. Sensitivity and scenario analysis – 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 client’s negotiation strategy with data-driven insights
4. Provided a clear understanding of the target’s long-term growth potential
