Background and challenge
Our client, a private equity (PE) fund, was considering a carve-out acquisition of a leading oil and gas (O&G) service provider. However, before proceeding, it wanted to validate its investment thesis by looking more closely at the target’s key markets, positioning and competitive performance. In particular, the client wanted to better understand the impact of COVID-19 and oil prices on the market segments that the provider served.
Approach and recommendations
The PE firm brought in L.E.K. Consulting to perform the required analysis and assessment. Critical to our work was understanding the target’s positioning versus its competition, including its technology capabilities and service offerings. We looked at the target’s addressable market by segment (e.g., gas versus liquid, technology type). In addition, we conducted a detailed analysis of market drivers and expected market growth, including the impact of COVID-19 and oil price decline. We also looked at the regulatory landscape and how it was likely to affect different market segments. Finally, we evaluated customer dynamics and purchasing criteria across the various customer segments.
Our research and analysis provided the PE firm with a detailed view of the current and projected market size and its structure and growth drivers, as well as a clear perspective on the target’s positioning. Within a very short period of time, the client was able to develop its investment thesis and support its valuation with the results of our robust analysis.