- Service:Commercial due diligence (CDD)
- Sector:Construction and building products
Issue
A manufacturer of air conditioning components had been growing strongly. However, new building construction was now forecast to fall. Did it still make sense to invest at this time of the cycle? And, given a series of exceptionally hot summers which seemed to have boosted recent sales, was it safe to bet on continuing vagaries in the weather?
Approach
We spoke to many installers in a number of countries and quickly established the factors driving demand. We combined this insight with construction market data, forecasts, and market share estimates to build a detailed financial model of future market demand and target company sales.
This analysis highlighted:
• the high brand loyalty of the target company amongst installers
• that replacement business was the key demand driver, and because a like-for-like replacement was much easier for installers, the company already had a substantial and fairly predictable revenue stream looking forwards
• that there was an increasing building refurbishment market, where the company’s product had distinct technical advantages which offered additional potential
Recommendations
AMR verified the somewhat ambitious growth projections of the company, supporting this conclusion through a detailed forecasting model. AMR also recommended a number of actions that the company should take to maximise its growth potential, based on an in-depth analysis of the competitive landscape. Finally, AMR confirmed a significant upside from increased export sales.
Result
The client acquired the company, which significantly exceeded all growth estimates in its first year of acquisition, and shows every sign of continuing this high growth, generating a very high return for our client.
Insight from AMR’s research
The replacement and renovation market is not to be underestimated in the building products industry and can offer major potential, even when new build activity begins to wane.