Strategic Due Diligence
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Strategic Due Diligence

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This deck was displayed at the MIT Private Equity Symposium April 5, 2013

This deck was displayed at the MIT Private Equity Symposium April 5, 2013

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Strategic Due Diligence Strategic Due Diligence Presentation Transcript

  • Mekko Graphics: A Tool for Strategic Due DiligencePresented at the MIT Private Equity SymposiumApril 5, 2013
  • Introduction• Mekko Graphics is used by over 75% of the top 25 private equity firms as identified by Private Equity International• It plays a critical role in all stages of the strategic due diligence process: • Market analysis • Competitive positioning • Customer analysis • Company analysis• Mekko Graphics supports chart types and features that are valuable for due diligence and not found in PowerPoint or Excel: • Marimekko chart • Bar-mekko chart • Cascade, waterfall or bridge chart • Data rows, data columns and CAGR columns that align with the chart • Growth lines and comparison lines• Mekko Graphics has over 15 years experience satisfying the charting needs of: • Strategy consultants • Private equity firms • Strategy and marketing professionals at Fortune 500 companies Copyright 2013 © Mekko Graphics. All rights reserved. 2
  • Market Analysis ~$900MM ~$600MM ~$600MM ~$2.9B Total = ~$5B 100% Unpenetrated 80 Market OpportunityPercent of Total 60 40 Competitor Share 20 Primary Player Share 0 Auto Industrial Medical Other Machinery Use a Marimekko chart to map the market by industry vertical, identifying an unpenetrated market opportunity. Copyright 2013 © Mekko Graphics. All rights reserved. 3
  • Market Analysis ~$900MM ~$600MM ~$600MM ~$2.9B Total = ~$5B 100% $1B+ 80 $50MM-1BPercent of Total 60 40 $0-50MM Companies 20 0 Auto Industrial Medical Other Machinery A Marimekko chart can also map the market by company size and industry vertical Copyright 2013 © Mekko Graphics. All rights reserved. 4
  • Market Analysis CAGR 2002-2012 Total 4.7% $5.0B 4.0 Other 3%Total Market Size ($B) 3.0 2.0 Medical 14% Industrial 8% Machinery 1.0 Auto 5% 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Use an area chart with a CAGR column to track market trends over time Copyright 2013 © Mekko Graphics. All rights reserved. 5
  • Market Analysis 58MM 5.9B 28.4B 14.4B 4.4B100% EMEA 80 Latin America 60 Asia Pacific 40 20 North America Europe 0 Area of Earth Population GDP Restaurant Meals QSR Meals Use a 100% stacked bar to identify market opportunities. Copyright 2013 © Mekko Graphics. All rights reserved. 6
  • Competitive Positioning Total Market: 100% All Other ~$2.2B All Other Industries All Other Industries Industries Rubber, Paper & Plastic All Other Industries 80 Appliances & Housewares Hydraulics & Fluid Handling Fabricated Metal Products Hydraulics & Fluid Handling Consumer GoodsPercent of Total 60 Electronics All Other Industries Industrial Machinery & Equipment Industrial Machinery & Equipment 40 Distribution/Industrial Supplies Industrial Machinery & Distribution/Industrial Equipment Supplies Distribution/Industrial Supplies Medical Medical Medical Medical 20 Automotive Automotive Automotive Automotive 0 Competitor A Competitor B Competitor C D E All Other Competitors Company Revenue $800M $400M $300M $200M $50M $500M This Marimekko chart presents market share by competitor and industry vertical. We use a data row to show overall competitor revenue. Copyright 2013 © Mekko Graphics. All rights reserved. 7
  • Competitive Positioning $100 Current Marginal Cost: ~$80 Country 80 USA Sweden 60 Canada Previous Marginal Cost: ~$50Unit Cost Chile Mauritania Peru 40 Australia India Venezuela 20 South Africa Brazil 0 Vale SA Rio Tinto BHPB C s fs N /O co re N al D lif CS O ar F et M C on m G M d CV Sa Ir an e u ba el c es ev m rt Cl Ku Fo The Bar-mekko shows competitor cost analysis. We use color-coding to differentiate countries and average lines to highlight key costs. Copyright 2013 © Mekko Graphics. All rights reserved. 8
  • Competitive PositioningEBITDA % 60% Competitor 11 Competitor 3 40 Competitor 9 Competitor 5 Competitor 2 A.C.M.E. Competitor 7 20 Competitor 16 Competitor 13 Competitor 14 Company with higher EBITDA 0 Competitor 10 Competitor 12 Competitor 15 Competitor 6 100,000 Competitor 8 (‘000 $) Competitor 4 Competitor 1 -20 0.01 0.02 0.05 0.1 0.2 0.5 1 2 5 10 RMS The bubble chart contrasts earning, market share and revenue for each competitor. The competitors in the shaded area are niche players with relatively high earnings. Copyright 2013 © Mekko Graphics. All rights reserved. 9
  • Customer Analysis(‘000) lt. 3,245 260 617 3,567 100% 43 8 27 237 276 37 100 86 80 173 2,066 60 2,811 BRAND 5 40 464 168 BRAND 4 161 BRAND 3 20 76 BRAND 2 935 BRAND 1 0 MODERN DISTRIBUTION DISCOUNT TRADITIONAL EXPORT This Marimekko chart presents sales by brand and channel. You can spot opportunities for growing a specific brand in a sales channel. Copyright 2013 © Mekko Graphics. All rights reserved. 10
  • Customer AnalysisRevenue in $M Total = $50,764M $20,021M $42,107M $9,074M $121,966M 100% others Customer3 80 60 Customer2 40 20 Customer1 0 South South -East Mid-West North/North East This Marimekko chart presents sales by customer and region. Copyright 2013 © Mekko Graphics. All rights reserved. 11
  • Customer Analysis 80% 0.7 70 0.7 Total Company Contribution Margin (%) Profitability: 65% 60 50 0% l al n e e ts es a ar io ry iv g tic ic ic uc ar t ou t s ot en tr ed dw t t ne in a od ta a n Pr o & H uc w u i ys dl um m ec pm en chi M or ar se es ic er d Pr to Eq To El sp an e H ap pm a Au H Pn al d al , ui l M an n s an l ia Pla , P et io od Tr d , d Eq ria ui c s M nc s t c r at o cs is be Fl l i er ed d st re G ni d rau M ub an du at ec ng at ro R W In an yd ic R ti ct br & por le H d an Fa E pp S A nd La i r, A Bar Mekko is an effective way of summarizing a company’s overall profitability by breaking out itsA components – The bar widths in this case are customer industry segment revenues and the height is the contribution margin Copyright 2013 © Mekko Graphics. All rights reserved. 12
  • Customer Analysis 80% Air, Land and Water Transportation R² = 0.68 Medical and Air, Land & Water Transportation segments display outsized margins vs. what Electronics would be expected for customers of that size and Electrical Medical 70Customer Contribution Margin Hydraulics Pneumatic and Fluid Hardware Handling Rubber Paper & Misc Plastic 60 Fabricated Products Metal Products Automotive Industrial Machinery and Equipment Appliances and Housewares 50 Segment Sporting Goods, Toys & Revenue Recreational Equipment 0% 0 2 4 6 8 10 12 $14K Average Account Size ($000s) A Bubble Chart can be used to overlay two additional dimensions of information to the overall profitability. In this case, profitability is plotted against the average account size for that industry (X-axis) and the total revenue of the segment (bubble size). Copyright 2013 © Mekko Graphics. All rights reserved. 13
  • Customer Analysis $14M $9M $59M$60M Customer1 Customer8 All Other All Other Customer3 Customer10 Customer7 All Other Customer9 $49M Customer6 50 Customer5 -$13M 40 All Other All Other 30 Customer3 20 Customer4 Customer4 Customer3 Customer2 Customer2 10 Customer1 Customer1 Customer9 0 2011 Customer Gains Customer Losses New Product Line 2012 Use a cascade chart to track customer gains and losses. Copyright 2013 © Mekko Graphics. All rights reserved. 14
  • Company Analysis‘000 $ CAGR +3% 1,612 2,101 1,539 57,623 58,06760,000 55,024 52,812 2,133 20,186 22,597 24,684 19,87540,000 CAGR 09-12 -38.8%20,000 PRODUCT 4 30,970 33,045 32,813 31,151 11.5% PRODUCT 3 7.5% PRODUCT 2 0.2% PRODUCT 1 0 2009 2010 2011 2012 Add a growth line and a CAGR column to a stacked bar chart to track sales by product for the last four years. Copyright 2013 © Mekko Graphics. All rights reserved. 15
  • Company AnalysisPercent of Total Total = $30,552,016 $1,136,232 $2,335,588 $10,162,964 $4,608,052 $2,903,704 $2,083,092 $1,641,224 $4,355,556 $1,325,604 100% CEO Office CEO Office CEO Business Analysis Telephony / Int ernat i onal Support Development agemen t Assistant Comm / Purchasi ng Management Web /D i st ri but i on Man Corporate Marketing Information Curriculum Finance Distribution Technology Ops Processes Real Training Risk Estate Treas ury Pa yroll Tax Technic al Su pport Training Compen sat ion / Ben efit s Internat ional Loss Prevention 80 Corporate Marketing Marketing Misc Design Recruiti ng/ Staffing Marketing Training Man agement Help Des k Aviation 60 Travel/ Sales Procure me nt Accoun ting Corpor ate HQ Operations Contract Adm/Legal Other A dmin 40 E quipment Services S ervices Operations Franchisee Accounting Software Development 20 Recruit ing QA Operations Construction Field 0 Brand 1 Brand 2 Development Human Legal Other Finance P&D Resources Information Technology You can use a Marimekko chart to break out costs by department. Copyright 2013 © Mekko Graphics. All rights reserved. 16
  • Company Analysis Plant 1 Plant 2 84% 80 79% 80% 75% Plant 1 Profitability: 70% 70% 70 69% 70 Plant 2 Profitability: 62%Contribution Margin Contribution Margin 60 60 58% Total Custom 54% 57% 50 50 40 40 0% Automotive 0% Automotive Recreational Equipment H uc t / M d u ar e cs Pl ub ro re E in e ial tr s c /P ts P Pa n tr Ho hi n al al se ry d er u c r/ as b ta l ec e ti c er/ ti o ar s c ic ic ti er uc ct ry ub r a R l P wa ni E l ar e od pe ts h r ro p In w ac st E l c e M a ed R s po ic ro d s/ w a d Pr a d d ia ial M et r an e M Ha le on u Tr M as b ic ec s/ p l tr Ap dus b Pl n Fa In By using two Bar Mekkos side by side, the profitability across two divisions of a company can be shown while retaining the relative size of each. In this case, the profitability of Plant 1 is higher than Plant 2 even though the automotive segment is weighing it down. 17
  • Company Analysis 4% 65% 5%Contribution Margin (%) 3% 55% -2% 0% 2011 Automotive Industrial Medical All Others 2012 Contribution Machinery Contribution Margin Margin A Cascade Chart is an effective way of showing the components of profitability change between two points in time. In this case, the decrease in profitability among automotive customers was more than offset by the increases in industrial machinery, medical, and all others between 2011-2012. Copyright 2013 © Mekko Graphics. All rights reserved. 18
  • Company AnalysisEquity Value Creation ($M) $375 $137M $367M 350 Expense Reduction Mgmt 300 Share Gain 250 $108M Market Growth 200 150 $136M PE Firm Mgmt 100 -$14M 50 PE Firm 0 Equity Value at Fees & Expenses Debt Paydown EBITDA Equity Value at Close Improvement Exit You can use a cascade to estimate the overall change in equity value for the investment. Copyright 2013 © Mekko Graphics. All rights reserved. 19