Who’s still standing at the end of the defense downturn?
Data analytics can help forecast growth scenarios as part of your due diligence.
A private equity firm was considering the acquisition of a promising, mid-market technology company. For ten years the technology company had licensed their suite of game-based training products to governments in the US and overseas to train soldiers. The technology company had a close relationship with its largest customers and reinvested in its software to provide the features their customers wanted.
However the market was changing – global defense spending was flattening and likely to decline. Other game-development companies were entered the military training market with newer technology. The private equity firm did not know if the target company had the momentum to ride out a turbulent market and emerge in a dominant position.
The private equity firm asked 2River Consulting Group (2River) to be part of the due diligence team – specifically to help them understand the attractiveness of the target’s business given a serious potential downturn in US and international defense markets.
2River combined industry insight, data analytics, and fieldwork to evaluate the economic value of the investment. We conducted a stakeholder assessment of 20+ key customers, competitors, and other decision makers. We integrated the target company’s sales database with 3rd party and proprietary market databases to create a bottom-up demand model.
We delivered an assessment of the future growth chances of the target company. Within this assessment we identified key “inflection points” (e.g., loss or delay of key contracts, U.S. “sequestration”) that could dramatically affect the value of the company. This analysis allowed the private equity firm to move forward with the deal confidently by structuring their acquisition with financial protections around these inflection points.