Marketing Due Diligence
The information memorandum did not include the data necessary to assess the true value of the business.
The situation -
The founding owners of Godfreys, the largest specialist vacuum cleaner retailer in the world, were looking to sell the business.
An ABN-Amro private equity consortium was interested in buying the business. They engaged IdeaWorks (the largest specialist retail advertising agency) to advise them on the retail implications of the due diligence.
IdeaWorks looked to Solutions Marketing to assist in the detailed market analysis and to advise on the achievability of Godfrey’s expansion plans
How Solutions Marketing helped -
We quickly discovered the information memorandum did not include market size or market share. Furthermore, the growth plan was based upon only qualitative substantiation. Aggressive store openings in Australia and New Zealand were a departure from past history.
Using several different sources of information and sophisticated modelling , we were able to arrive at the market size and then compute Godfrey’s market share, not only for the current year but projected five years into the future.
The research and analysis demonstrated that the growth figures provided seemed optimistic, with most of the growth having to be extracted from competitors potentially resulting in a 2009/10 significant sales shortfall.
The results -
Our clients, IdeaWorks and ABN-Amro, were secure in the knowledge that together we had performed the most rigorous marketing due diligence.
The eventual buyer of Godfreys paid more than $330M which was somewhat more than ABN-Amro was willing to pay.