Background and Challenge

A private equity (PE) company requested a commercial due diligence of a major specialty building products materials company.

Approach and Recommendations

L.E.K. Consulting’s key tasks included appraising the fundamental attractiveness and risks of the manufacturer as a potential investment for the PE client. L.E.K. assessed each of the company’s divisions based on market sizing analysis and forecasts, distribution channel trends, customer assessment, and competitive positioning. L.E.K. also developed revenue forecasts for scenarios that considered variations in the construction industry recovery and potential market share loss for two of the company divisions, due to the highly competitive nature of the markets they serve.

The L.E.K. team performed interviews with dealers, distributors, retailers, contractors, and competitors to gain a wide perspective on the market. The team also developed a survey to quantify identified market trends and gain insight from its partners and customers.

For one of the company’s divisions, L.E.K.’s market analysis revealed that one of the company’s vertical markets’ growth would depend largely on new housing starts recovery.

Results

L.E.K. provided the PE client with a comprehensive understanding of how the target company was positioned in the market, along with supporting evidence to move forward with the investment.