Client Situation
A middle market consumer products company had the opportunity to purchase a U.S. manufacturer within a new segment of the same industry. There were several things that made this purchase attractive from a strategic viewpoint. The new segment allowed for a broader reach of existing products, and only 20 percent of the customers overlapped, meaning there was growth potential from selling products to existing customers from both companies. By having a U.S. manufactured product, the company minimized its risk with shipping, currency fluctuations and international trade tariffs. Additionally, utilizing the existing infrastructure had the potential to maximize synergy savings and reduce the overall costs of the acquired business.
Solution
The company brought in a senior-level executive, now a E78 team member, with extensive financial and operations experience in the consumer products industry, to assist with the acquisition. The executive developed a high-level roadmap of the acquisition process including a due diligence checklist and a plan for the first 100 days after acquisition to achieve the strategic objectives. As part of this, the E78 team member helped arrange a 100 percent seller-financed deal that would preserve the capital of the acquiring company for growing the combined company. He also worked with the sales team to develop new goals and objectives so they would be ready to execute the 100-day plan as soon as the transaction was completed.
Results
In the first year of operation, the combined company grew sales by 57 percent, achieving a 38 percent market share according to a major market research firm, primarily as a result of, successfully executing three post-acquisition strategies:
- Doubling the footprint of the largest customer, therefore increasing sales by 74 percent to this customer through new marketing, packaging, and the addition of a private label brand
- Marketing and sales to the acquiring company’s existing customers, which accounted for approximately 20 percent of the overall sales increase
- Acquiring additional major customers through previous relationships, which comprised another 20 percent of the overall sales increase.
In addition to increasing sales, the company was able to realize substantial savings from a 44 percent reduction of its workforce by hiring a plant manager who focused on operational efficiencies.
