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Due Diligence. Project to create a vertically-integrated non-alcoholic drinks and glassware production enterprise

Situation

  • The client approached a bank to gain financing for a project to create a vertically-integrated non-alcoholic drinks and glassware production enterprise
  • The bank demanded an independent assessment of the possible risks in connection with financing the project

Goal

  • To conduct an independent assessment of the business plan
  • If needed, to provide corrections for updates
  • To give recommendations regarding the development strategy

Our approach

  • Assessed the project parameters: the markets on which each product type will be sold; the competitiveness of the proposed enterprise; costs, prices, operational profitability, investment, and infrastructure prerequisites
  • Identified and presented the main project facts to confirm and validate the economic parameters
  • Proposed adjustments to the product strategy and pricing policies. Providedstrategydevelopmentrecommendations
  • Identified and corrected the discrepancies in the key financial model regarding the taxes to be paid, cash flow calculations, and a number of other financial coefficients
  • Assessed risks
  • Adjusted production volumes so they would decrease in line with market parameters
  • Prices reduced and brought in line with those of the market
  • Following corrections to the forecast manufacturing volumes and costs, the production portfolio was changed (removing the previous loss-making positions) and the product portfolio was restructured
  • The absence of a detailed marketing strategy, successful FMCG project implementation strategy and financial information on costs and sales was highlighted. The absence of a marketing team to implement projects was also exposed
  • The client was able to develop a new strategic position for its product portfolio (for its market, price range, competitive advantages, distribution channels), analyze and take decisions regarding the branding of the new product portfolio

Results

  • The client chose the correct strategy, avoided investment risk and the choice of an unwelcoming segment, and developed a sales strategy
  • The project produced more accurate valuations and met the questions and criteria posed by the bank
  • The bank and client both had the opportunity of seeing the lower and upper limits of the project

 

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