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DUE DILIGENCE / ACQUISITION ASSISTANCE

The Beck Group assists clients in due diligence, which is the analytical process firms go through to document the value of a business or other assets generally as part of an acquisition. This analysis involves all key aspects of the business, including past financial and operating performance, asset condition and valuation, management team assessment, and assessment of future performance and risks.

Beck has assisted numerous firms in evaluating the value of potential acquisitions, as well as critiquing the assessments of others. Activities often incorporated in this type of analysis include:

  • Industry comparison of historical financial performance

  • Valuation of real estate, improvements and machinery

  • Assessment of raw material supply and competitive pressures, market and other external trends, planned capital investments, and sales and marketing strategies and practices

  • Critique of financial performance projections

CASE STUDIES

 

Mass Timber Manufacturing Acquisition Due Diligence—The Beck Group recently assisted a confidential client by completing a third-party appraisal of a mass timber manufacturing operation. Beck’s tasks included a site visit to assess the state of the equipment, a valuation of the business as a going concern, and recommendations about the operation’s strengths, weaknesses, and opportunities for improvement. Regarding the going concern valuation, Beck used an income approach (using revenue multiples and EBITDA multiples) and comparisons to benchmark companies.

 

The mass timber manufacturing supply chain is an area of Beck expertise based on nearly 10 years of involvement in the International Mass Timber Conference as presenters, International Mass Timber Report authors, and other project work similar to this one. The client will improve their competitive capacity in this fast-growing market segment.

Timberland Acquisition Due Diligence—The Beck Group was recently retained to assist a confidential client in assessing the future supply and demand for pulpwood and sawtimber in the region where the client was contemplating a timberland investment. Beck’s tasks included using its mill supply and demand database to identify all the pulpwood- and sawtimber-consuming mills in the region and comparing their estimated annual consumption to historical harvest levels. Beck also developed a sawtimber stumpage price forecast given the supply and demand balance in the region.

 

Our mill database is based on the most recent and accurate information that is not available elsewhere. The client can make an investment decision based on the most complete information, filtered for relevancy and tailored to its needs.

Acquisition Due Diligence—The Beck Group assisted an investor interested in acquiring a wood products manufacturing complex that included a sawmill and plywood operation. Beck’s tasks included visiting the site to observe and evaluate the operations at work, developing a valuation of the business as a going concern (including evaluating the company’s projected income and earnings multiples based on historical financial performance relative to comparable publicly traded companies), comparing the competitive strengths and weaknesses of the operations, developing high-level estimates of capital investment that would likely be required following the acquisition, and providing commentary and analysis for potential lenders and investing partners. 

 

Because of Beck’s expertise in forest products manufacturing operations, our client was able to develop an acquisition bid based on accurate data developed by a neutral third party.

Acquisition Due Diligence—The Beck Group assisted a private equity firm considering acquisition of a company with a variety of wood products assets in Eastern Canada. Beck’s tasks included comparative analysis of sawmill profitability and other performance characteristics for Eastern Canadian sawmills versus those in other regions of North America, an outlook for timber supply trends in the region, describing lumber trade issues between Canada and the U.S., developing an overview of the Eastern Canadian pulp and paper market, and developing maps showing the location and ownership of sawmills and pulp mills in Ontario and Quebec. 

 

The Beck Group’s expertise in forest products manufacturing, timber supply and demand, and international trade allowed our client to successfully acquire a valuable group of manufacturing facilities.

Acquisition Due Diligence of a Specialty West Coast Lumber Producer—This project was undertaken at the request of a confidential client to assist in the evaluation of a specialty lumber producer with multiple West Coast manufacturing locations. A first step in the acquisition due diligence was an in-depth supply and demand evaluation of the timber resources and competition in the region surrounding the mill operations. This was followed by an evaluation of the overall business including an assessment of the sawmill operations, management reporting systems, management team and workforce, and facility maintenance/capital expenditure plans and opportunities. The due diligence also included a critical review of the company’s financial projections and an assessment of the company’s competitive position for log procurement, including development of return to log values for the company’s specialty product line in comparison to mills competing for the same timber resource producing other lumber products. Additionally, Beck staff provided comparable transaction values from a database of prior sawmill transactions maintained by The Beck Group.

 

The acquisition was completed, and the company continues to grow and improve its new business.  Beck staff members were able to utilize their extensive experience in the specialty lumber business including knowledge of markets, manufacturing economics of a variety of different product lines, and regional timber supply and demand. Additionally, The Beck Group maintains a database of historic sawmill transaction values that is useful in establishing the fair market value of a sawmill business.

South American Capital Investment Due Diligence – Beck staff assisted a confidential client who operates a private equity firm with due diligence of a potential investment in a South American softwood lumber and remanufactured product manufacturing business, including biomass boiler and optional power generation.  Areas assessed included timber supply, demand and future trends; markets for both lumber and remanufactured products as well as local and export markets for sawmill residuals; capital plans and budgets, including review of used equipment available for purchase; review of vendor design and cost quotations for major equipment (including wood fired boiler and turbine generators); financial projections; and site related factors for project development (including a site visit to the planned development location).


For this project, Beck assembled an experienced project team including its in-house staff as well as industry veterans with knowledge of biomass power generation and sawmill equipment capabilities and project development.  The services provided to the client were invaluable in identifying project risk factors and working with the private equity firm and the company developing the project to make appropriate changes in plans prior to financing and construction.
 

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