A Dealmaker’s Sounding Board

Situation:

A charismatic executive at an industrial fabrication company approached us for valuation help in connection with a key customer decision the company was facing. The company had an opportunity to partner with an important customer to leverage their engineering expertise by becoming the dedicated product development resource for the customer. In doing so, the company would be effectively divesting its R&D department in exchange for payments and royalties.

We helped management decide whether to go forward with the deal by comparing the value of the company with and without doing the deal. Our analysis showed that by transforming its business model in this way, the company could generate substantially more value for its shareholders.

Result:

Based on our conclusions, the client went ahead with the transaction, which led to a significant increase in profitability and reduction in debt. Since then, management has called on us to help with a variety of opportunities ranging from joint-ventures and acquisitions to licensing deals.