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Buy side due diligence for an expanding food processor

May 31, 2017 Case Study 1 min read
Financial, tax, and IT due diligence leads to a significant reduction in purchase price and aides in strategic growth decisions.

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The client

A U.S. subsidiary of a European food processor looking to expand its food product offerings with an acquisition.

The challenge

Looking to expand its food product offerings, a U.S. subsidiary of a European food processor was looking to acquire a regional food processing company. The target, a $30 million producer of shelf-stable canned foods, had achieved significant revenue and profit growth in the past few years and was forecasting quantum growth into new markets. However, the food processor had concerns regarding the sustainability of revenue and profitability to justify the purchase price.

The solution

Our comprehensive team of experts conducted financial, tax, and IT due diligence assessments of the target company. Our team also led interviews with management on the strategic direction of the industry and growth prospects with both existing and new customers. In addition, we identified crucial talent that the client should retain from the target company, which provided additional stability throughout the acquisition.

The benefit

Our team aided with introductions to U.S. lenders, which ultimately provided a portion of funding to the client that was based on acquired working capital and fixed assets. We identified over 25 adjustments to EBITDA that needed to be considered as part of the purchase negotiation. In addition, our analysis and inquiry identified expected changes in the customer and product mix that highlighted near-term risks, which, along with the EBITDA adjustments, led to a significant reduction of the purchase price.

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