Dairy Company Due Diligence

due diligence

Due Diligence

"Dairy business or Milk Factory due diligence is an investigation of a business prior to signing a contract. A common example of due diligence is the process through which a potential acquirer evaluates a target company and its assets for acquisition. We have carried out Technical Due diligenc on dairy businesses with turnove greater then $2bn and less than $1m."

The financial aspects and profitability of a company are critical but equally if not more importantly is sense checking how the profitability was achieved and if budgets, equipment and capex are appropriate for the business to achieve its goals. The summary included here is not comprehensive and should not be relied upon, it is for general guidance and understanding only.

The objective of a due due diligence is to assist the client in evaluating the technical, operational and commercial capability of the target business and also assist in estsablishing its value. It is critical to employ the services of an experienced professional who can usually pick up dander signals instinctively where someone with less experience could miss out a seemingly minor issue which may cripple the business ongoing.

The dairy due diligence process will usually commence with opening up an online secure shared folder. The folder should be pre-indexed where documents for various parts of the Due Diligence can be shared securely with changes and acces password protected and logged.

This will be followed by a detailed preliminary information request to minimise time on site meetings and allow the business to prepare the necessary documents / information. There should be a priority highlighted for critical information as some information is more important. Prepare a valuation spreadsheet where the impact of findings can be collated e.g. inneficient dairy equipment in need of replacement will require a capital investment. Condition of buildings, drains, utilities etc etc.

Example headings:

(this is a guide only and far from the detail required).
1. General and Legal:
2. Human resources:
3. Contracts / agreements:
4. Financial:
5. Technical:

Other to be divided under appropriate headings

  • i. Sales contracts with major distributors
  • ii. Supply contracts with major suppliers - e.g. milk supply
  • iii. Financial agreements including bank loans, lease liabilities and other loans
  • iv. Insurance policies
  • v. inter company agreements
  • vi. All Sales and Purchase Agreements
  • vii. Business Plan and Projections:
  • viii. P&L accounts
  • viiii. Bank and cash position
  • x. Receiveables
  • xi. Stocks
  • xii. Leases
  • xiii. Fixed assets
  • xiiii. Other assets
  • xv. Creditors
  • xvi. Financing
  • xvii. Any other commitments / liabilities
  • xviii. Tax
  • xviiii. Leases
  • xx. Employee liabilities
  • xxi. Disputes / any Legal concerns
  • xxii. Major agreements with other parties
The Dairy Technical Due Diligence will usually be achieved by providing an independent opinion on the following technical and operational issues:-
  • Identify key Technical risk areas for Dairy Manufacturers
  • Review of installed dairy production and packing capacity and utilized capacities
  • Review of existing dairy factory site (environment and buildings)
  • Review and cost estimation of sny planned factory expansion plans, budgets for equipment and buildings. This includes risk assessment (delays, lead time and spill-overs)
  • Review of new dairy products formulation and pricing
  • Availability of spare parts of existing Dairy processing equipment. This includes a review of dairy Ingredient suppliers countries and reputation.
  • Review of projected capital expenditure for replacement, overhauling and upgrades
  • Review of utilities (Effluents, water, power, steam, compressed air and refrigeration)
  • Review of technical competency of the staff of the company
  • Review of competitiveness on a local and global scale based on product characteristics, quality, price service level and product development
  • Review practicality of the business plan and the suggested project timelines for any new products
  • Operational risk assessment. (production bottlenecks and construction & interface risk)
  • Industry related risks
  • Landfill
  • PCB's
  • Dairy Building construction / presence of asbestos
  • Insurance / Fire risk / Buildings suitability and condition
  • Security of supply and quality assurance of supply

Dairy Benchmarks

he Technical Due Diligence may also include a review of commercial and other issues providing an independent Expert Dairy Consultant opinion on:-
  • Dairy Market share, size, trends, competition and growth
  • Review of existing dairy products formulation, pricing and mark-up
  • Data on Dairy competitors / market share / imports / prices and volumes usually provided by the client.
  • Consumer preferences
  • Milk Industry Regulatory insights / Planning restrictions
  • Staffing and ability
  • Competitive advantage
  • Achievability of the Dairy business plan projections
  • Commercial viability of any planned new dairy products
  • Emerging trends in the dairy industry in country and globally
  • Dairy Export potential - Export data to be provided by the client for the dairy consultant to review

Dairy Benchmarking

Benchmarking helps to understand how the business compares with similar sized competitors

Utilities:

Source, Availability, Consents, Quality, Cost, Size, restrictions, Suitability, licences, renewals, proximity, ownership, reliability

Electricity:

supplier, incoming supply, Cable size, Transformers proximity, transformer size, restrictions, interruptions, costs etc

Water:

Mains, Well, Water table, Consents, Costs, depth, seasonality, security of supply, wquality, treatment, sensitivity, security

Waste Water:

Availability of treatment, cost, consents, quality, volume, restrictions, security

Steam

Gas

Diesel / Oil

Compressed air

A shortage of a single utility can cripple a dairy Business

We can work independently or as a part of your team in the acquisition and disposal / sale process.


We are one of the most experienced Dairy Consultancies operating Globally For more information or to discuss your requirements please contact us.

John Watson
Office: +44 1224 861 507
Mobile: +44 7931 776 499
jw@dairyconsultant.co.uk

We are a longstanding member of the Society of Dairy Technology and have Fellowship of the Institute of Food Science and Technology.
Member of the Society of Dairy Technology and have Fellowship of the Institute of Food Science and Technology IOD

 

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John Watson
Office: +44 1224 861 507
Mobile: +44 7931 776 499
jw@dairyconsultant.co.uk

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We are a longstanding member of the Society of Dairy Technology and have Fellowship of the Institute of Food Science and Technology.
IOD

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