Pre-Sale Due Diligence & 100 Day Planning in ManufacturingManufacturing
One client hired us to perform pre-sale confirmatory due-diligence. They wanted us to take a look at the business to identify and alleviate any potential problems or hurdles before the sale of their business to a private equity fund. This was a large 9,000 person division of a global manufacturing company, that was being divested.
Although the parent company had talked publicly about a potential divestiture, we had only just launched the project when a bidder (and subsequently the buyer) arrived on the scene. After quickly launching a global team to coordinate data collection at all of their international locations we determined that the primary challenge to a quick and efficient close were the transition service agreements. From a legal or contractual perspective, the majority of operational, financial and personnel problems could easily be converted to the NewCo, but the back office support to keep the business running would need to be thought out in detail. We worked with the management team of the division to detail out a 100 day plan that would enable the business to continue to operate on the close-date and swiftly transition from the parent company – or parent companies underlying vendors – to those of the NewCo.
- Modifications to employee and vendor agreements needed.
- Development of transition service agreements negotiated terms and timelines
We were able to quickly identify the 50-odd connections between the divested company and the parent company. From there we developed plans on how to sever these ties. Some were as simple as changing billing, others involved renegotiations with vendors, and finally, others were TSAs that enabled NewCo to continue to lean on the parent companies infrastructure for a short time until they could develop their own solutions. Because this was a friendly, negotiated transaction between the parentCo and the PE firm we were able to offer flexible terms. The 100-day-plan provided detailed guidance on what options were available to the new entity and what steps would need to be followed to get fully transitioned away from the parentCo.
Following the remediation of a few small issues and the development of the transition plans the deal was signed at $1.4 Billion and closed on schedule. We stayed in touch with our project sponsor and within 120 business days everything had been transitioned successfully and the NewCo was off of the TSAs and functioning independently. Our sponsor was given a promotion at the new company for a job well done.