Case Study Overview
- Industry: Agriculture, Mining & Transport Manufacturing
- Turnover: $115m
- Ownership structure: Merger
- History: All four businesses are family-owned operating in regional Australia and produce high-performance, durable equipment and machinery.
- How were AD referred?
Referred by one of the entities who had engaged Active Directions to deliver a strategic review and provided advisory services.
Client Challenge
Each company encountered distinct challenges such as difficulties in penetrating new markets, inefficiencies in process, and the need for improved marketing strategies. Additionally, they faced issues in alignment for future growth, navigating economic factors and ensuring regulatory compliance.
These challenges collectively impacted their ability to grow, innovate and maintain operational efficiency. As a result, the four businesses came together to assess a potential merger as an option to mitigate the threats facing their operations.
Active Directions was requested to undertake preliminary analysis and prepare a financial model to assess the feasibility of a merger between the four companies.
This feasibility assessment model was to assess whether there was an opportunity for the 4 businesses in Australia to properly merge their businesses to increase their overall business valuation through revenue and costs synergies combined with market potential.
Approach
- The parties involved wanted to explore optimal options to work together as a merger or merged entity to achieve mutual benefits and a higher return of investment together.
- Active directions met with each entity individually, facilitated discussion sessions to verify the objectives of the merged entity and gathered data from all parties to provide a like-for-like analysis across customers, markets, products, channels and financials.
- A working group was formed across the four entities to monitor progress, collate information and ensure clear coherent communication throughout the process.
- Active Directions delivered a Financial Model with relative shareholding valuation, a Feasibility Case Report, and a 90 Day Roadmap for next steps and facilitated go-no-go discussion.
Outcome
- Strategic Goals
The primary strategic goals of the feasibility study were to assess the potential merger's ability to achieve greater scale, geographic diversification, and diversification of sales channels. The study aimed to evaluate the feasibility of creating a truly national business across major Australian states, leveraging existing and complementary product ranges. Additionally, the study focused on identifying expected efficiencies across the supply chain, back office, and other overheads. - Quick Wins
By being on the ground with each of the four entities we were able to identify quick wins from a customer, product or operational perspective. These quick wins delivered immediate improvements for the entities as well as helped with moving towards common practices in preparation for a potential merger. - AoB
The study highlighted several risks that could impact the success of the potential merger. These included cultural, integration, and market risks faced by a potential merged business. These risks were raised as part of the next phase of integration planning. - Forecasted Growth / Improvements
A CAGR of 22% in Revenue was forecasted for the merged entity upon entry into new markets. Potential Revenue synergies of $0.3m and Net cost synergies of $2.2m in year one. - Summary of Supporting Projects
Following the decision to proceed Active Directions then transitioned into support the integration planning phase and setting a 90-day roadmap was established which focused on quick wins and critical priorities such as standardising core processes and establishing share services.
