During the course of a due diligence project, our team’s deep expertise identified numerous opportunities for significant operational and manufacturing improvements.
The Challenge
A leading private equity firm that invests in lower-middle-market specialty manufacturing and business service companies was considering a purchase to bolster its coatings and adhesives platform.
They reached out to ChemQuest for detailed due diligence on the potential acquisition target, including assessments of its ability to grow organically, cost reduction/margin expansion opportunities, EH&S, the management team, inorganic growth opportunities, and more.
In-Depth Analyses and Assessments
Our team undertook a thorough evaluation of the target company, including:
- Addressable market, dynamics, and growth trends
- Value chain and key competitors by channel
- Benchmark for target’s cost of production and pricing against competition
- Sustainability of EBITDA moving forward
- “Voice of customer” (perceived value proposition and perception vs. competitors)
- Technologies and products
- Product development/R&D capabilities and pipeline
- Operational audit, including production processes, capacity, and utilization
- Supply chain, including raw materials, pricing, and market supply/demand dynamics
- EH&S audit, with emphasis on EPA and OSHA compliance
- Management team and organizational capabilities
- Inorganic growth opportunity, including detailed platform assessment and top-down and bottom-up analyses
The Results
The ChemQuest team’s unique specialty chemicals and manufacturing expertise uncovered capacities and capabilities for various product areas that had not been previously available. We explored product costing and highlighted opportunities for the client to improve margins, specifically related to labor- and equipment-intensive products vs. simpler standard products.
Our insights regarding aged inventory are estimated to reduce inventory by over 20%. We also provided recommendations on capital expenditure for process improvements, with estimated cost savings exceeding $200K annually.