Deal execution – buy side
Insight into revenue and profitability drivers
Derive deeper insight into the revenue and profitability drivers and enhance management’s reporting capabilities using advanced analytical tools.
We assisted a listed multinational logistics provider to evaluate the potential of purchasing a local pharmaceutical distributor based in Southern Africa.
The client needed greater clarity on the profitability and performance drivers of the customer base and how the overall performance was driven by pricing and the activity of individual customers and customer segments. The target, being an owner-manager company, lacked sophisticated management reporting capabilities, making it difficult for the client to derive any deeper insights into the business.
The challenge
Our client needed to understand the historical trends and performance drivers of the target, given the limited amount of information readily available. While the target management was able to qualitatively describe the business drivers and the performance over time, our client required confirmation around the business model, drivers and the impact of external factors.
The target business handles over 7,000 products from 200 suppliers and distributes these products to over 650 customers, including larger and smaller businesses. The entrepreneurial nature in which the target business was operated meant that detailed and insightful management reporting lagged behind other priorities.
We were asked, as part of a financial due diligence process, to derive more insight into the target’s sales data in terms of seasonal pricing, profitability trends, once-offs, underlying growth by geographic region, individual customer analysis and supplier analysis.
The outcome
We were able to extract a large amount of raw sales data from the target for the past three years. Using data cleansing, data manipulation and segmentation techniques we were able to create an interactive dashboard. This allowed for visualising the performance of the business and drill-down functionality into individual customers, customer segments, products, product segments and suppliers. Margin performance was broken down into these drivers to better understand drivers and risks in the business, as well as to confirm management practices and the impact of management interventions.
We were able to correlate market data with sales data to support customer and supplier trend analysis. We were also able to segment sales into new categories; this was previously not possible with the target’s existing reporting capabilities. Using dashboards and visualisations, our team was able to have meaningful conversations with target and client management.
