GA Case Study - Multinational food-producer group - strategic due diligence on an acquisition and merger
Background
Our client is a multinational food-producer group. After years of building a dominant position in South African markets, it decided to enter a new category through the acquisition of a local branded operation, merged with the allied operations of a long-standing partner to form a joint venture.
The structure had layers: the acquired brands moved into the joint venture; the partners' operating assets moved into a new company beneath it; and each party's shareholding depended on the true relative value of what it contributed. The price on the table amounted to a full business purchase for a target that was loss-making once its real costs were included, and both buying parties had to defend the transaction to their own boards. That was precisely when discipline mattered most.
GA Case Study - Multinational food-producer group - strategic due diligence on an acquisition and merger
Challenge
The deal turned on three linked valuation questions at once: what the acquired brands were worth, how the joint-venture split should reflect each party's contribution, and what the combined operation underneath would actually deliver.
None of them could be answered from the numbers on the table. Reported financials absorbed cost by volume rather than by activity, and the costs the buyer would actually carry - distribution and shared services - sat outside them. We were given no access to customers or to the seller's sales team, so price and customer behaviour had to be reconstructed from the data itself.
Then lockdown arrived. Input prices, exchange rates and demand became genuinely uncertain just as the parties needed to agree terms - and a single point estimate on any of these questions would have been impossible to defend.
GA Case Study - Multinational food-producer group - strategic due diligence on an acquisition and merger
How We Helped
We worked in time-boxed phases with a go/no-go decision at each boundary, and set up a four-step evaluation: value the acquired brands standalone, value the partner's business standalone, translate both into contributions to the joint venture, then test each party's return against its cost of capital. Premiums assumed early were shown eroding value later.
We rebuilt the reported financials on an activity basis, benchmarked shared-service and distribution burdens into them, and normalised unit economics per ton. Revenue per unit fell about 3 percent a year while the cost of purchases rose about 6 percent, so contribution margin per unit fell roughly 18 percent a year; marketing ran below a fifth of the benchmark needed to hold the brands.
We turned that into terms: a net-asset-value floor, valuation ranges, warranty and earn-out structures, and an alternative deal shape - then supported term-sheet negotiation, definitive agreements and regulatory submissions.
Recreated unit-economics exhibit (index, 2017 = 100, anonymised): revenue per unit slid about 6% over two years while contribution margin per unit fell about 32%, as input costs rose faster than price.
GA Case Study - Multinational food-producer group - strategic due diligence on an acquisition and merger
Results
The project was completed on time despite the sudden lockdown.
The client gained a defensible value range for the acquired brands, a quantified basis for the joint-venture shareholding, and a clear view of what any premium above net asset value would cost it afterwards. Fully-costed, synergy-adjusted scenarios showed the combined business could be materially better than the sum of its parts, but only with disciplined pricing, distribution and marketing investment. That reframed the conversation from price to structure. The deal was pursued on revised terms consistent with that evidence.
GA Case Study - Multinational food-producer group - strategic due diligence on an acquisition and merger
Lessons Learned
When a deal turns on numbers no one can pin down, the deliverable is not the number - it is the structure. Sensitivities, scenarios and value boundaries, converted into terms, let parties transact under uncertainty.
A price floor does the same work as a valuation opinion: it tells a buyer where walk-away begins, and it moves the argument onto things both sides can control. Phased work with explicit go/no-go decisions protects a buyer from over-committing before the evidence supports it. And an engagement does not stop because offices do: if the analysis platform is remote-ready, a lockdown changes the meeting format, not the deadline.
