Identify and value joint growth initiatives, then validate base business

Our client was present in the German market, but volumes were small and growth was slow. An opportunity had arisen to partner with a leading domestic brand, generating some €150m in sales at the time. This would enable our client to distribute its range more effectively in the market, and the domestic player to benefit from our client’s international category management skills.

Caden Strategy was appointed to value joint growth opportunities, and then conduct commercial due diligence on the domestic brand’s existing business.

Collaborate with prospective partner but keep commercial objectivity

We began by spending time with the potential partner’s management team both at their sites and visiting grocery outlets. This gave us a thorough understanding of the business and the market context.

Next, we facilitated client-partner workshops to identify revenue and cost saving synergies. These were grouped under three categories:

• Our client’s products sold through the partner’s distribution network, using one of the partner’s brands
• Partner’s brands relaunched in Germany, using the superior category management skills of our client
• Consolidated manufacturing plants.

From this, we devised a five-year joint business plan that was signed off by both parties. Throughout this planning stage, we conducted bi-weekly calls with stakeholders across our client organisation, including the European MD and global heads of strategy and finance. This was critical in order to get the deal approved in a complex multinational organisation.

Once both parties were convinced there was enough upside in a joint venture, we conducted commercial due diligence on the existing business. This included reviews of the market and competition, key accounts and SKUs, raw material price drivers and recovery, and risks to the plan.

Both parties realise upside

Our client acquired 49% of the German player together with a series of call options to acquire the rest of the company over the next five years. This structure enabled both parties to benefit from the anticipated upside in the joint business plan.

The joint venture got off to a very strong start, aided by the fact that the two parties had worked so closely together in devising the business plan. Sales are forecast to increase by ~50% over the next five years.