Assessing Quality and Scalability to Project Post-Acquisition Costs
A growth-focused middle market Private Equity firm engaged Hilco Global’s Performance Improvement practice to assess a Target company’s vehicle and equipment fleet as part of a forestry industry acquisition due diligence. The objective was to provide a quality and longevity perspective of the existing fleet, and assess the quality and scalability of the organization, processes, and systems that support the acquisition, preventive maintenance (PM) and disposition of the equipment fleet. Using the assessment findings, the firm wanted post-closing CapEx projections for fleet, staffing and systems needs they may face over a 4-year period, calculated using annual growth scenarios of 50%, 75% and 100%.
Prior to the onsite assessment, the Performance Improvement team reviewed all provided data and interviewed the Target CEO, CFO, the Accounting, HR, Fleet and Maintenance managers. Field work sites were selected to provide a representative sample of the full fleet based on equipment type, age, value and quantity. Three personnel deployed to visit ten locations in Colorado, New Mexico and Nevada. They engaged with site operators, photographed the equipment, observed it in operation, and used an electronic assessment method to evaluate the functionality specific to each equipment type. Additional interviews with key personnel and a visit to their maintenance facility were also completed to gather insights on the maintenance protocols, available systems and operational processes.
Hilco Global’s Performance Improvement practice provided an assessment report highlighting that the equipment, regardless of age or manufacturer, consistently started on the first attempt and operated effectively, demonstrating the high quality, maintenance and longevity of the fleet. The operation is both disciplined and adaptable, supported by cross-trained operators and a strong corporate culture. The assessment identified systems integration and technology gaps that must be addressed to support the anticipated rapid fleet growth scenarios. These findings are supported by the field observations, interviews, and data from equipment manufacturers and industry sources.
The assessment confirmed the fleet was well-maintained and managed, and that the leadership team had the skills to scale the business. Modeling the growth projections provided the firm with the estimated future costs of the scalability enabling an informed acquisition decision based on the post-acquisition total cost of ownership.