Feasibility Analysis Vastly Improves Consolidation Plan; Efficiency Improved and Capacity Increased
Client: Leading Manufacturer of Writing Instruments
Challenge: Review Business Plan and Feasibility of Consolidation
Two of the world's leading manufacturers of writing instruments were contemplating a merger and required financing for the acquisition. Critical to the company's business plan were savings derived from radical downsizing and plant consolidation. Before secured lenders would consider financing the acquisition, they required reassurance that the company's business plan was feasible.
In this case, the smaller of the two competitors was the acquirer, and the business plan called for shrinking operations while fulfilling 100 percent on-time customer shipments. To accomplish this aggressive goal, a plant twice the size of the acquirer's facility would be closed and most of the equipment would be moved and reinstalled in the smaller plant. Success or failure of the company hinged on its ability to achieve its aggressive sales projections while also capturing the substantial cost savings from the perceived synergies.
AccuVal Approach
AccuVal immediately reviewed management's business plan and inspected both plants. Meetings were scheduled with managers, engineers, riggers and transportation companies to address the complexities, timing and costs of such a large move. Although the basic structure of the plan was found to be well conceived and the total cost of the move accurately estimated, AccuVal suggested many improvements and eliminated a few conditions that could have severely impacted success. Plan improvements recommended by AccuVal included changing the mix of machinery that would be moved versus sold; changing the production layout; integrating production equipment formerly operated as independent work centers; proposing an alternative inventory buildout strategy to ensure 100 percent fulfillment during the transition period; recommending water purity studies be conducted to ensure color consistency and quality control of the products manufactured; and identifying the need for additional warehouse space to accommodate the storage of the finished goods produced. The impact of these suggestions resulted in enhanced productivity, increased production capacity, on-time customer shipments, consistent color quality in products compounded by the company, efficient finished goods distribution and a higher realization from the assets sold. And, the company also received the funding needed to complete acquisition.
Bottom Line: Efficiency Improved, Capacity Increased, Product Quality Controlled, ROI Increased, Financing Secured
AccuVal enhanced a sound business plan by making it better, improved the overall efficiency of the production facility, increased production capacity, eliminated the potential for quality control problems, substantially increased ROI and provided asset-based lenders with the reassurance to proceed with the financing required. The financial impact of AccuVal's improvements was estimated in the millions.
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