Due diligence for a financial investor

During early  2013, InduStreams worked with a European debt-equity fund providing expert knowledge and advisory on evaluating the risks and attractiveness of a debt and equity deal involving a mid-size European container terminal.

Financial investors are increasingly getting into the terminal sector usually as minority investor at single asset or portfolio level. They typically are attracted to stable operating assets with some growth potential in stable regions such as EU, North America and Australia. However, they rarely have deep terminal experience internally and can rarely match our global network.

Relying on our experience from advising clients as well as the many deals we have been involved with in globally when working for major port operators, we and our global network approach a task like this focusing on the typical issues:

  • Bringing the client up to speed on industry, country and assets
  • Definition of relevant market
  • Supply and demand analysis
  • Competition analysis
  • Quality of management assessment
  • Analysis of financial and operational performance
  • Regulation and government risk assessment
  • Country-specific factors
  • Labor risk assessment
  • Business plan and budget analysis
  • Overall risk assessment and mitigation
  • Deal-specific factors

In this case, we went with the client to the terminal for two days to collect data and impressions, evaluate and ask all the tough questions. We also spoke to relevant people in our network and conducted extensive desk research.

The client requested a mix of education and hand-holding as well as formal report-like analysis to support the investment case going to their investment committee. Ultimately, the client wanted to gain comfort that the business case was sound and that they understood it well despite having no prior investment experience in the terminal industry.

During a four-week period we were able to clearly clarify the key risks and the overall attractiveness of the investment. The client ultimately closed the transaction and subsequently increased its ownership further before exiting completely making a substantial and very quick profit on the transaction.

We also regularly work with clients who want a quick assessment of an acquisition opportunity in order to determine if it is worth their time and money to take a closer look. After such an assessment of asset quality and major issues the client usually requests further analysis, which may lead to extensive valuation work and full commercial due diligence.

 

Michael Møller

Michael Møller

Finance

Former Regional Finance Manager and Controller at APM Terminals in Asia and Europe, Michael works with terminals and investors to understand and manage risk and value.

During his career at APM Terminals, Michael worked with valuation, performance, controlling, financing, acquisitions and business development.

Educational background: MBA from Georgetown University and M.Sc. (Finance/Accounting) from Copenhagen Business School.

 

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