Pivoting Investment Thesis Based on Advisor Knowledge
Validating Market Leadership in Niche Manufacturing for Informed Investment
A private equity firm was evaluating an investment in a specialized manufacturing and installation business. A key challenge for the private equity firm was the target company’s regional focus; the firm needed to confirm the target’s market leadership within its geographic service area and gain a deep understanding of those local market dynamics. The firm lacked critical information regarding the customer’s perspective—specifically, how homebuilders make supplier decisions, how suppliers differentiate themselves from competitors, primary market trends in the target company’s service area, and the impacts of inflation on the industry. To confidently proceed or pivot, the firm required first-hand insights from expert advisors into this specialized regional market.
The Apex Approach: Targeted Insights for Regional Market Due Diligence
Apex Leaders employed a customized research approach to address the private equity firm’s unique needs. We identified and engaged advisors located specifically within the targeted regional area, meticulously aligning them with the profile of homebuilders likely to use the products supplied by the target company. Our extensive search identified a broad pool of potential experts to ensure the most relevant connections.
Apex facilitated direct access to these experts through confidential consultations and interviews, focusing on critical areas of inquiry:
- The target company’s reputation and market position from a customer’s viewpoint
- Understanding the decision-making process for homebuilder suppliers
- Key differentiation factors among specialized manufacturers
- Impacts of market trends and inflation on the regional industry
The Expert Advisors Delivered
- A Vice President of Operations from a custom home building firm with extensive purchasing and contractor management experience
- A Chief Development Officer from a prominent home building company with prior experience as a Division President
The Results: Confident Decision to Pass Based on Validated Concerns
The engagement with Apex Leaders proved pivotal for the private equity firm’s due diligence process:
- Concerns Validated by First-Hand Accounts: Ultimately, the firm passed on the specialized manufacturing opportunity. A key reason for this decision stemmed directly from a confidential Apex call with a former customer of the target company. This advisor’s insights into why they decided to switch suppliers directly confirmed the firm’s biggest potential concerns about the deal.
- Strategic Pivot: Hearing this first-hand feedback from a former customer provided concrete validation of their initial concerns, allowing the firm to confidently pivot their investment thesis and avoid a potentially problematic acquisition.
We decided to pass on the opportunity. In fact, one of the key reasons for doing so was an Apex call that we had where a former customer of the target company informed us of the reasons why they decided to switch suppliers. Hearing this feedback from a former customer confirmed our biggest potential concerns about the deal to date.” —Deal Team
Strategic Due Diligence: The Power of First-Hand Accounts
By leveraging Apex Leaders’ customized approach to every project, the private equity firm was able to confidently walk away from a deal by having their biggest potential concerns validated by expert advisors with first-hand knowledge of the company’s strengths and shortcomings. This case study exemplifies how targeted private equity due diligence through Apex Leaders’ expert network provides critical, real-world insights that empower firms to make informed investment decisions, even when it means walking away.
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