Carve-Out Acquisition
Challenge
Breaking into a new market can present as many challenges as it does opportunities – particularly when that new market is in a new continent and your entry strategy means carving-out an existing business from a multi-national parent company. This was the situation faced by Alexion Partner’s client, a US-based international packaged food company wanting to expand into the growing global market. The company had a very limited European presence and so decided to target an established business which would give it a leading position in Germany and the U.K., and would provide a platform for future growth. The target was part of a large global FMCG company and therefore had to be strategically, operationally and organizationally separated from its parent company to operate as a stand-alone entity.
Approach
Alexion Partners was engaged on three principal streams of work: firstly, to conduct commercial due diligence on the target and the European snack market; secondly, to evaluate the potential benefits and disadvantages of separating the target from the parent company; and finally, to design a suitable business model and organizational structure for the business as a standalone entity.
Alexion Partners team conducted an in-depth commercial review of the target, covering:
- Growth opportunities in the European snack market and the competitive landscape,
- Consumer perceptions of the target in Europe, which was particularly important in the light of reduced advertising spend recently,
- Assessment of existing routes to market and how sales could be optimised in these channels, and identification of any viable new routes to market,
- Trade strategy review, analyzing the combination of pricing, promotional and trade margin strategy currently being pursued by the target,
- Product portfolio review, identifying gaps and potential new product opportunities based on current trends.
Simultaneously, a senior team of Alexion Partners analyzed the implications of separating the target from the parent group across four key dimensions:
- Shared functions in sales, marketing and support activities,
- Partially-shared supply chain functions (procurement, logistics, warehousing and distribution),
- Common 3rd party contracts (negotiated based on the overall business from the parent company),
- IT systems.
Alexion Partners assessed the risks in each area and identified where a clear separation was possible versus where a new system or organizational structure would be needed.
Following the creation of a suitable roadmap for the carve-out, Alexion Partners designed a new organizational structure to enable the target to operate as a standalone business following the acquisition. The team identified alternative go-to-market models and investigated the implications each alternative would have on the new commercial functions of the business. After evaluating all options from a feasibility and cost perspective, Alexion Partners devised a new business model that was the basis for the new organizational framework to run the business.
Finally, the Alexion Partners team brought together all of the modules to develop a post-acquisition roadmap and timeline, delivering a complete transition plan that detailed critical actions, from agreeing to acquire the business through to completion of the transaction, and through the first year of ownership.
Results
The research, analysis and modelling delivered by Alexion Partners provided a business plan and negotiating position that ultimately enabled the client to acquire the target company. The post-acquisition transition plan informed the client’s future planning activities and strategy, ensuring the business was able to hit the ground running on day one of the acquisition.
Since the acquisition, the new company has exceeded all expectations, proving to be a successful and profitable company and establishing itself as a strong and secure platform for future growth into other European markets.