Case Studies - Mergers & Acquisitions
Business Challenge
A multi-national electronics and technology company based in Japan was seeking to make a US acquisition to expand its world-wide revenue and product base. The company had entered into discussions with a large US technology company which was divesting one of its products and services divisions. The challenge was that the business was a division within a division and did not have separate systems and books.
Nathanson and Company was contracted to conduct due diligence, negotiate the transition services agreement and assist in developing the future state transition plan. The scope of the work included Information Technology Services, Customer Fulfillment, Global Logistics, Supply Chain, Sales and Accounting. The Nathanson Team was to focus on negotiation and finalization of the service agreements while working to reduce one-time costs as well as the ongoing support costs covering a multi-year transition period. The acquisition cost was estimated at over $1B.
Our Solution
The Nathanson team led a rapid due diligence assessment using our proprietary Merger and Acquisition methodology. With an aggressive timeline of 10 weeks to complete assessment and negotiations, the team provided the client with the required expertise to drive the end-to-end review and negotiation process. The team negotiated contract scope, transition costs and an ongoing transition services agreement.
As the first phase of the acquisition was completed, the client asked the Nathanson team to stay on to lead the next phase of activity. Focus during Phase 2 was to provide support for the transition and integration of the IT services agreement and to lead the negotiation of any additional service agreements that would be identified as a result of the detailed planning and transition activities to be completed in Phase 2. Additionally, the Nathanson team was engaged to support deployment waves of country transition from Seller to Purchaser providing operational support and guidance while developing new company processes for onboarding, offboarding, asset procurement and IT support.
Results Achieved
The due diligence efforts resulted in significant purchase price accommodations, the reduction of separation and transition costs of over $70M and the successful separation and day 1 transition. In addition, Nathanson negotiated contracts with new suppliers to provide a complete new systems environment for the parent as well as the acquired business.
Business Challenge
A multi-billion dollar, international technology products and services company was seeking to expand its revenue and product base worldwide. The company was seeking an experienced Merger and Acquisition team for due diligence, transition and integration of the new business unit. The scope covered both business services, product services and It services as well as maintenance services from due diligence through TSA and long term services agreements. The challenge was to identify synergies and ways to speed the separation and integration.
The acquisition was over $2.5B and the one time and transition service costs were initially estimated at over $350M for our client.
Our Solution
We provided the methodology, structure and expertise for the end-to-end process to drive the due diligence, costing, synergy identification and transition agreements and led a team of over 100 client members to finalize scope and contracts. The team was able to surface numerous issues which impacted purchase price and paved the way for timely closure and exit plans and successful day 1 transition.
Results Achieved
The result was the completion and sign-off of all agreements. Significant purchase price reductions were achieved and the TSA costs were reduced by $80M per year. In addition, Nathanson was hired to assist in managing the transition.
Business Challenge
A thirteen billion dollar technology manufacturing company who recently completed a major acquisition was seeking to streamline worldwide operations to meet their go forward strategy.
The client needed to establish a Contract Governance and Management System to manage the outsourcing and implementation contract that resulted from the acquisition. The client needed to continue to utilize IT services from the seller while separating from the sellers IT infrastructure and systems. In addition, the client needed to educate the resources within the newly joined company on many aspects of the outsourcing contract and how to obtain the best value from their outsourcer.
Our Solution
Nathanson and Company developed a strategy to negotiate the best price, clear scope of work and commercial service levels from the acquisition in order to ensure the acquisition and subsequent separation of operations was a success.
Results Achieved
Our efforts resulted in a cost savings of $30M over the original separation contract as well as improved service levels and a clearly defined scope of services.
Business Challenge
A sixty-six billion dollar international conglomerate was purchasing a three billion technology business and needed to outsource existing IT services from the seller. The business being purchased was losing over one billion dollars a year and was going to be merged into the clients existing technology business. Cost cutting was the order of the day.
The seller was providing the IT services at cost to its own division. Since both parties were going to be selling goods and services to each other in the future, the agreement was to sell at fair market price. The seller normally achieves a gross margin of 25% with their commercial clients and therefore the buyer was told to expect to pay 33% more than the sellers “internal cost”.
In order to hit the profit goals of the combined company, the cost of outsourced IT services needed to be reduced by 35%, not increased by 33%. The final price being offered was more than two times what the buyer could afford in one year.
Our Solution
The Nathanson team designed an outsourcing contract with the seller for IT services that allowed for enough flexibility to reduce the price over the term to the desired level.
Nathanson and Company was able to accomplish this and take it one step further. Using our fact based negotiation techniques, we reverse engineered the solution, tightened up the scope of work to meet the clients existing requirements and added market competitive service levels. Building from the bottom up with the outsourcer, we were able to obtain the services for 22% less than the client had been paying at “internal cost”.
Our team managed the implementation of the outsourcing contract including training key personnel how to successfully manage the outsourcing partner, optimize operations, retire aging systems and end projects with an unfavorable return on investment.
Results Achieved
As a result of our efforts, commercial grade service levels were achieved at less than half the price the client expected to pay with the flexibility to retire systems, applications and unnecessary services at no penalty. This resulted in driving operational cost down more than 45% within a year of the acquisition.
Business Challenge
A sixty billion dollar financial services company desired to jump start growth in a subsidiary through acquisition or as part of a joint venture. A potential acquisition target had been identified.
The challenge was to rapidly determine if the critical conditions existed to create enough value for both parties to justify significant investment in time and money. Conditions such as operational synergies, opportunities to create additional margin through scale and the chance to leverage an investment in business continuity needed to be examined.
Our Solution
Using our rapid due diligence process, Nathanson and Company led a team of twenty client resources to design a proposed organizational structure, cost synergy overview, potential deal structure and a list of critical assumptions.
Results Achieved
Through our efforts, both parties were able to determine that while synergies existed, there was not a strong enough business case to move forward. Millions of dollars of cost were avoided.