M&A Railways

Type of Model:           Acquisition Model

Industry:                     Railways

Client:                         Director of Australian Subsidiary

Background:              

The client already owned railways in Australia.  State Government put up their commercial railway for tender.  Client was one of four bidders for the state rail assets.  The opportunity was for a 2 month discovery and due dilligence process and then the submission of unconditional bids, highest compliant bidder won.

The Model:                

The client was the project director and a current director of the Australian subsidiary.  He assembled a team of experts including:

  • rolling stock
  • locomotives
  • staffing and rostering
  • customer relationships
  • accountants
  • major international investment bank

The model was designed to capture all the expert opinions and results and produce a 20 year forecast of the business.  The forecast was built to reflect each commodity and rail link (over 100 combinations).  The optimal operational configuration was modelled for each combination.  Scenario planning was run for the key potential outcomes to determine the impact on the value of the business.  P&L, Balance Sheets, Cash Flows and various Valuations were constructed.

Outcomes:                 

The model successfully forecast the value of the business to within 10%..  The key customers were analysed and those that had to be retained to achieve the target value identified.  The model facilitated team discussions about what should be implemented as part of the realisation of synergies and helped identify critical assumptions.

In particular, the model assisted in discussions with the investment bank around the valuation of the business and the level of debt that the business could sustain.   


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