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SSCO Shanghai Head Office
Stenvall Skoeld & Company (China) Limited
4th Floor 139 No. 1 Ruijin Road
Huangpu District, Shanghai
Tel: +86 (21) 6136 6008
Commercial Due Diligence Case Study
Entering the Pharmaceutical Packaging Foil Business
Situation
- US-based private equity investor evaluating an investment in a Chinese aluminum processing company (the ‘Target’).
- Target seeking funds to launch a new manufacturing line producing pharmaceutical packaging foil.
Approach
Stenvall Skoeld’s approach included determining:- Industry and market segment attractiveness
- Suitability of the Target’s strategy
- Achievability of the Target’s financial forecast
- Interviews along the Target’s value chain (e.g. distributors, R&D partners)
- Interviews and discussions with real estate and construction industry experts in the region of China where the Target sold its existing products
- Interviews with potential pharmaceutical clients
- Analysis of Target’s business plan financial forecasts
Result
- Industry analysis showed despite a weakening overall real estate and construction sectors, the segments where to Target’s products where used – primarily government and public building – would remain stable over the coming years
- The pharmaceutical packaging foil was attractive however our assessment was that the Target would not be able to compete with established player who were expanding capacity and already had strong relationships with customers in the regions
- Scenario analysis gave strong indication that Target would not come close to achieving its strategic and financial goals
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