Background and Challenge

A private equity (PE) firm requested a commercial due diligence to help with its investment decision regarding a major pet-related products company in Japan.

Approach and Recommendations

Key directives for L.E.K. Consulting were to assess the market risks and attractiveness of the target company. To meet the tight decision-making deadlines faced by our PE client, L.E.K. conducted an in-depth market diligence in less than three weeks. Key activities included:

  • Triangulating primary and secondary research to confirm market size and growth by product segment, and to identify the most salient macro trends and drivers in pet-related products
  • Conducting in-depth interviews with wholesalers, retailers and competitors to develop a clear understanding of purchasing decision drivers and the target company’s position across retail channels
  • Assessing on-the-ground strengths of the target company and its key competitors to gauge effectiveness of sales practices, incentives and policies influencing brand loyalty, consumer purchases, and shelf space
  • Developing a summary assessment of the target company’s attractiveness as a potential investment, which included:
    • Identifying competitive strengths and risks
    • Forecasting revenue and share by product line
    • Indicating growth opportunities

Results

L.E.K. provided the PE client with a comprehensive understanding of the sector’s market dynamics and strength of the target’s market position. We utilized the fact base and analysis to support our client during discussions and negotiations with the target company’s management. Ultimately, supported by insights from the assessment, the PE firm decided not to move forward with the investment.