The Challenge?
- A large water company was aiming to acquire a regional player as part of their expansion plans into Asia. The client wanted to have a better understanding of the broad market dynamics as well as assess the achievability of the target’s financial projections, particularly in light of the recent economic downturn.
Point Consulting’s approach and solution
- To understand the dynamics and build a market forecast model, we developed a research-based work programme focussed on gathering all available data from publicly available sources and supplementing this with interviews with key market participants. This data was used as input to our market model whilst the interviews provided additional commentary as to the market drivers, trends and dynamics.
- To determine the achievability of the financial projections put forward by the target’s management, we first held discussions with management to fully understand the basis of their forecast and the underlying assumptions to understand the growth drivers. From there, we worked to test and validate the assumptions in the context of the market, the competitive positions as well as the customer referencing exercise.
Value delivered
- The work concluded that the target’s financial forecast was indeed ambitious in light of the forecasted growth rate of the market. Additionally, the customer interviews conducted suggested that 20% of the Top 20 customers felt that the target lagged behind their competitors in terms of product quality and would probably switch supplier in the next 12 months. Based on the analysis, we suggested sensitivities to the forecast which were built into our client’s valuation of the acquisition, ultimately getting them a better deal.