Industrial Equipment

Due Diligence Designed for a Competitive Acquisition

A buyer evaluating acquisition of a smaller regional competitor.

We ran commercial, operational and organizational diligence in parallel and found customer concentration and deferred maintenance the data room did not show.

Concentrated customer accounts found that the data room did not disclose

<1 yr

Until the contracts on those accounts expired

Situation

A data room is the seller's presentation of the business. It is accurate as far as it goes and silent on risks the seller has no duty to volunteer. Customer concentration, deferred capital spending and key-person dependency are the three it most often understates.

The buyer had been caught this way before. On an earlier deal, the true condition of the acquired business appeared only after closing. This time the target showed solid revenue and what the seller called a loyal customer base, and the timetable pushed the team to move fast.

What we did

We ran the three diligence workstreams at the same time instead of in sequence. That kept the closing date intact without thinning the work.

Workstream	What the data room showed	What independent checks found
Customer concentration	A "loyal customer base", reported in aggregate	Two concentrated accounts, with contracts expiring within a year
Equipment condition	Maintenance records as provided	Deferred maintenance across the fleet, confirmed by an independent inspector
Timeline	Pressure to close on the seller's schedule	Parallel workstreams that met the closing window

Impact

Conversations with the target's principal customers revealed that a pair of accounts carried a disproportionate share of revenue. Both contracts were due to lapse inside twelve months.
The inspector's assessment of the fleet against its maintenance records showed work that had been put off.
With both findings documented, the buyer negotiated a material reduction in price and went ahead with a sound transaction. The size of the reduction is not stated in the case study.

What made it work

We went to primary sources. Customers described their own relationship with the target, and an inspector who did not work for the seller looked at the machines. Neither finding could have come from documents the seller chose.

Results

Two concentrated accounts identified, with contracts expiring within the following year

Deferred maintenance confirmed across the equipment fleet

Purchase price renegotiated on the evidence

Engagement facts

Sector: Industrial Equipment
Practice area: M&A & Intermediary
Client profile: Acquirer of a smaller regional competitor
Services: Commercial, operational and organizational due diligence
Key phases: Three workstreams run in parallel between letter of intent and close

This case study is a composite drawn from multiple engagements. Client details have been changed and combined to protect confidentiality, and figures are representative rather than attributable to any single client.