Due Diligence

What do you look for when buying a business. Something to add to the portfolio with complimentary products, or something with potential to deliver financial return with the right investment?

Due diligence is largely limited to the financial and commercial position of the business. Forensically unpick the accounts to ensure profits are real.  Delve into products and customers to determine the scalability of the business.

But what about the operations side?

• Are the machines fit for purpose, maintained fully and running efficiently?
• Do they have the right systems to run the operation?
• Is the structure right for the business?
• Are labour & material usage under control?
• Are the people capable, do they possess the competencies for the job?
• Is there spare capacity to be tapped?
• Are there bottlenecks preventing volume?
• Can the site run other products?

There are literally hundredss if not thousands of unanswered questions that if you don’t understand before you buy, will come back and bite you on the bum.

In the grand scheme of things the cost of a Due Diligence Analysis from Chasm will be tiny, the benefits from understanding the operation before the purchase will be infinite.

The main reason for selling a business is to make money from the sale. Whether that sale is planned or hostile, the shareholders want to maximise the return on their invested time and money.

Potential buyers might be looking at your product range to compliment their own.

They might be looking at your technology and thinking it easier to buy yours than set up themselves.

But is the business you are selling fit for sale?

You are going to be selling for 6-8 x EBIT / profit so what would it mean to have extra thousands added to that profit line.

Operational projects targeting efficiency of labour, machinery and materials usage range from £500k to £4.0m in benefits depending on the size of operation. Imagine if you could sell with that additional cash on the bottom line!

Yes projects cost money but deliver 3:1 ROI without the sales multiple.

Building a portfolio of complimentary businesses may seem obvious and easy. Whether you are looking to compliment your current portfolio, expand into other categories, or vertically integrate to manage supply chains,  making the right choice is difficult.

What happens when you have a portfolio? How do you assess the capabilities of each individual business and collectively?

Chasm have the expertise to run the operational due diligence and health check across your portfolio to understand;

• the operational capability and capacity of all operations
• are there economies of scale to be gained centralising functions?
• do we have the right systems to operate the sites (and group)?
• do we have more capacity than needed and could sites be consolidated?
• where is the best place to build a ‘super factory’.

Additional to this there is organisational structure, operational strategy, competencies, and skills of the site teams.

As with any operation there is an infinite amount of analysis required to build the right strategy, multiply this by numerous sites and the task becomes harder.

Chasm will take all that pain away and work with you to build the best  portfolio possible.