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Acquisition opportunities for private equity firm

Client

A US-based private equity firm with interests in the industrial sector.

Opportunity

The client was looking to invest in a company with activities in the industrials sector. The funds invested in this company were to be used for expansion in an unexplored vertical. The client engaged SG Analytics to build a detailed financial model that would cover multiple scenarios and determine the investment value using different valuation methodologies.

Solution

Based on a detailed understanding of the client’s investment research process and valuation framework, SG Analytics adopted the following approach:
  • Our team created a 5-year quarterly financial model that identified key revenue and cost drivers of potential target companies.
  • The team focused on the growth path of these company by analyzing the geographical distribution of their products.
  • We performed a due diligence and figured that the overall market was growing at c. 6% CAGR, primarily driven by growth in end-user markets, such as automotive, metals, and mining.
  • We created a detailed model with drivers and switches that would be used to emulate different cost and return scenarios.
  • The team summarized all insights into a football field analysis that calculated a fair value range based on different valuation methodologies, including DCF and trading and transactions comparables.

Value Delivered

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1
SG Analytics delivered a detailed model to analyze the influence of different cost and return scenarios on the investment value.
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2
SG Analytics submitted a football field analysis based on different valuation methodologies.
 

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