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PJ Dick Final Client Presentation
- 1. PJ Dick CompanyConsultingField Project1
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- 4. 4Company OverviewPJ Dickoperates as a general contractor, construction manager, and design builder.
- 5. Operates in commercial, institutional, and government related projects.
- 6. Privately held companywho reaches market through PJ Dick-Trumbull-Lindy Paving conglomerate.
- 7. Large presence inWestern PA, headquartered in Pittsburgh. Growing market share in Ohio, DC Metro, Eastern PA, and West Virginia.
- 8. Notable Projects: ConsolEnergy Center, Three PNC Plaza, UPMC Children's Hospital, David Lawrence Convention Center, North Shore T-Line (tunnel).PJ Dick’s current regional territoryConsol Energy Center
- 9. Go or NoGo??5In building a self performing activity group, does Drywall belong?RewardsRisksYesWith mode of entry dependent on PJ Dick’s risk taking capability
- 10. Topics of DiscussionProjectOverviewApproaching the ProblemFinancial AnalysisScenario AnalysisSummary & Recommendation6
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- 12. 8Financial AnalysisIncorporating aframeworkSWOT AnalysisEconomic FactorsMarket AnalysisIndustry/ Competition AnalysisVendor Relationships MatrixStrategic FactorsShould PJ Dick self-perform the dry wall activity?Merger/Acq./JV/Self-PerformValue addition to customersNoSynergies with existing businessSynergy with current resources
- 13. 9Defining the ProjectScopeFinancial AnalysisVendor RelationshipMode of EntryEconomies of ScaleIndustry/Comp. AnalysisMarket AnalysisSynergiesSWOT AnalysisIMPACTFEASIBILITY
- 14. 10What numbers sayabout the market
- 15. 11What experts sayabout the marketAlthough 2010 does not look promising, the industry is expected to rebound starting 2011 and continuing in 2012Economic conditions will dictate responses from subcontractors and competitors Expert Quote, “Earning a 5% margin today is as good as earning a 15% margin 5 years ago.”
- 16. 12A window ofopportunity!!PJ Dick has weathered the storm and has performed better than the rest of the marketThe industry experts believe that the market should recover soonTherefore, we believe that there is a clear window of opportunity for PJ Dick to enter the drywall market in the present situationIndustry
- 17. 13LowLowLowScenario ModelingMediumMediumMediumHighHighHighDegree ofParticipationModes of EntrySelf - PerformHow should PJ Dick enter into the Drywall industry?Joint VentureAcquisitions13
- 18. 14Financial Analysis: TheAssumptionsRamp up % in acquisition is higher than JV because of the single entity factor and better management prospects.Ramp up % in JV and Acquisition increases as a result of increased synergies due to expertise, benefits of scale received from the partner company
- 19. 15Financial Analysis: TheScenariosAcquisition JV Self performPV of Cash flows$32.02m$22.47m$8.27mPV of Sub-contracted cash flows$ 0.35m$0.91m$0.54mTotal PV payoffs$32.37m$23.01m$9.17mThe discount rate is 6 % as provided by PJ Dick. Discount rates16Numbers can change!!Discount Rate Vs. Scenario Payoffs
- 20. Scenario Analysis: TheFramework
- 21. 18Quantitative Scenario Model50%Risks, 50% RewardsRisksRisksRewardsRewardsThe model is built. Let’s interpret this graphically!!
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- 23. 20Looking for Scenarioswith Low Risk / High RewardScenario Decision MatrixyHighJVHJVMAQMAQHAQLIIIJVLRewardSPHSPMIIIIVSPLLowxLowHighRisk
- 24. 21Scenarios From Quadrant1.....Scenario Summary of Results
- 25. 22Summary & RecommendationRiskTakers choiceRisk AverseRisk SeekRisk Averse choice
Editor's Notes
- #4 This is a nice opportunity to thank the PJ Dick folks who gave you all the information.
- #9 I’d take out the Yes – No blocks from the middle, and go directly from the question to the types of analysis.
- #11 Why not express the numbers in millions, so that they’re easier to read?
- #13 Change “PJ Dick effect” to “Effect on PJ Dick”It should be PJ Dick has “weathered”
- #15 This may be a good point to note that the 8% and 12% profit margin estimates may be somewhat optimistic – as suggested by the target company analysis later.
- #16 EMPHASIZE assumptions. It’s the comparison across scenarios that needs to be focused on, i.e., Acq> JV > Self-perform
- #20 The “under the hoods” look at how you arrived at the recommendations is a little lengthy. Be prepared to cut it short and focus on the decisions themselves.
- #23 Remember to highlight the real facts. Our recommendations are based on several realties of PJ Dicks situation, which is also reflected in our model and rankings. Why Joint Venture Medium to AQ low, not high or medium. While true the rewards are the greatest in AQ med and high, we feel it makes very little sense to take on such a risky practice to attain a couple more margin points on a practice that only reflects about 10% of PJ Dicks revenue stream, perhaps 15% in near future is expanded. Given the fact that subs contribute to an overwhelmingly large portion of revenue to PJ Dick it just doesn’t make much sense to try and take on a course of action that increases margin on a small revenue stream, that can potentially harm or even decrease margins on a large revenue stream. That not good for PJ Dicks’s bottom line. That’s why we think, and our model reflects that even the risky choice reflect a low degree of participation and (disruption).
- #24 Patrinos Corp profit margins are a far cry from the 8-15% that the client is expecting. This is worth reflecting on. What margin numbers did you get from the other Drywallers that you ran the D&B numbers on? Clearly, an important step for PJ Dick is to stress-test that assumption of Drywall margins.