Strategic Diligence of an Investment Target, a Diesel Genset Original Equipment Manufacturer in India
Background and Challenge
The client wanted to strategically invest in a diesel genset original equipment manufacturer (OEM) in India. It wanted UC to validate certain assumptions made by the OEM in their 3 year business plan, for example:
- The end user application industries would grow in demand and would have multiplier impact on the revenues of the OEM
- That the company was highly competitive on certain performance benchmarks, including cost leadership
The decision whether to invest or not and the valuation there-off was not a part of the engagement scope.
Approach and Recommendations
To strategically identify an investment target, UC adopted the following approach:
- Conducted desk research and primary research with more than 50 respondents across customer segments, principals and OEM traders/ dealers of diesel genset.
- Developed a perspective on the market share of various principals across product segments (kilovolt-amps wise) and on the market sizing (year wise) in value and volume for each customer segment and product segment (kilovolt-amps wise).
- Studied about the OEMs primary range of genset, the growing competitive intensity with existing and new players increasing their focus, the key buying criteria of the initial equipment cost and efficient service support of the customer segment and the narrowing gap in the prices of key principal competition
- Analysed and compared the cost structure with other OEMs
UC facilitated the decision making for the private equity firm by providing perspective on:
- The breakup of the genset market size, kilovolt-amps wise (in value and volume)
- Validation of the sectors growth opportunity over a 3 year horizon
- Possibility of achieving a business plan target for each of the revenue stream projected