- Service:Commercial due diligence (CDD)
- Sector:Consumer goods and services
Issue
AMR’s client needed to invest its entire pension fund in just one company for complex tax reasons. This investment could not afford to fail, for the pensions of tens of thousands of members were resting on a positive outcome. The client's corporate finance adviser had found - on the face of it - the perfect match, but in an industry dogged by sinking margins under relentless pressure from the supermarkets, could AMR verify the company's attractiveness?
Approach
AMR established that the market segment where the company was positioned, organic foods, was one of the fastest-growing and most attractive segments in the food industry. During its research, AMR completed more than 60 in-depth interviews with the leading supermarkets, specialist distributors, market experts and trade associations, and suppliers. We also tapped into the best existing market research reports on this segment.
Recommendations
AMR established that the target had a strong position in the market, and a reputation as one of the founders of the industry. The target provided a valuable service to the large supermarkets, and had developed its own brand, providing additional protection from being substituted. In addition, the high level of loyalty felt by specialist retailers, in a segment where people are as much driven by ethical principles as by financial motives, provided strong protection. AMR therefore recommended that in a fast-growing market with little risk to market share, and with an unblemished ethical reputation, the investment should be made.
Result
The client accepted AMR’s recommendations and went on to acquire the target, which has exceeded expectations - the pensions of the members are secure!
Insight from AMR’s research
There are still attractive segments in the food business; the immense power of the supermarkets does not always lead to a downward spiral of ever decreasing margins.