M&A DUE DILIGENCE EXPERTISE

Canback & Company

November 2014
PREDICTIVE
ANALYTICS
INTEGRATORS

CANBACK & COMPANY

Cambridge, Massachusetts
42.365869,-71.093471
www.canback.com
+1-617-399-1300

Canback & Company prefers fundamental analysis of primary data over conceptual frameworks,
achieving greater accuracy in problem solving at a lower cost

Performance

MANAGEMENT CONSULTING INDUSTRY S-CURVE

- Datasets at the
center of problemsolving
- Repeatability and
scalability for
efficiency

- Conceptually based
problem-solving
- Experience preferred
over hard analysis

1900

1960

Predictive
analytics

A new paradigm
with higher
performance

Few, if any, breakthroughs since the

early 1990s

Traditional
management
consulting

1990

2014

Time

The future is already here, it is just unevenly distributed

- William Gibson

Canback & Co has offices in ten key international markets, allowing us direct access to vital
centers of economic growth. Boston and Johannesburg are core offices, while the other eight are
satellite offices
OUR CAPABILITIES

OUR GLOBAL OFFICES AND LEADERS

Office

Management
Consulting

Predictive
Analytics

C-GIDD

Market
Research

Boston
Japan
Johannesburg
Shin Ito

Tokyo
Boston

China
Beijing
Xingxing Liu

India

Jakarta

Aniket Pargaonkar

Mexico City

Mexico
Nigeria
Francisco Maciel
STREAM Insight Ltd

Indonesia
Brazil

South Africa

Kenya

Lagos
Teddy Purnomo

Mark Wopicho

Giancarlo Spata

Nairobi

Arshad Abba

We have established satellite offices in key international markets: Brazil, China,

Japan, India, Indonesia, Kenya, Mexico, and Nigeria. Our new core office in South
Africa opened this month.

Pune

Sao Paulo
For more information about the various offices please visit our website

Canback & Co is often cited in the press, research reports, annual reports, and investor
presentations by some of the largest companies and organizations in the world

Abuja +12: Shaping the Future of Health in Africa (2013)

The Shifting Urban Economic Landscape: What Does it Mean for Cities? (2013)
Mapping the Path to Future Prosperity - Emerging Markets Inclusive Growth Index (2014)
African Cities Growth Index 2013 (2013)
Quarterly Divisional Seminar Series South Africa (2014)
Quarterly Divisional Seminar Series Asia-Pacific (2013)
Annual Results Presentation (2013)
Entering the African Beer Market: Uncovering the Strategies to Enable Success (2013)
NYC Jobs Blueprint (2013)
The Future of Retailer Brands (2010)
Africans Open Fuller Wallets to the Future (2014)
The War for Nigeria (2013)

Nigeria - A Nation Divided (2011)

Hot Spots - Benchmarking Global City Competitive (2012)

M&A due diligence is today our largest practice because of our fast, fact-based and practical
approach
Market Opportunity
Assessment

Experience & Approach

Target Evaluation

M&A due diligence

>35%
Management
consulting
>65%
Strategy
development
30%

Canback & Co

Tokyo

Beijing

This used to be our core activity and

is still the #1 priority. We work on
market entry, brand development,
consumer segmentation and other
market/marketing efforts in emerging
countries

We pioneered, and are still the

worlds only supplier of GDP and
income data at the subdivision and
city level: C-GIDD

We occasionally conduct standalone

market research for existing clients
where we know the topic

Market/industry
research
<5%
Johannesburg

We have a special expertise in quick

delivery of M&A due diligence,
working with up to 30 team members
to evaluate acquisition opportunities
from a market and functional
perspective

Predictive models are almost always

part of our management consulting
work. We also build them on a
standalone basis

Predictive modeling
15%

Commercial
databases
15%

Boston

Case Studies

Jakarta

Lagos

Mexico City

Nairobi

Pune

Sao Paulo
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Canback & Co has built its M&A due diligence track record through a combination of
experience, technical strengths, and in-market capabilities
Market Opportunity
Assessment

Experience & Approach

Target Evaluation

CANBACK & COMPANYS M&A DUE DILIGENCE CAPABILITY

Case Studies

Click on image below for a copy of

Due diligence
experience

Independent decision
making
Completed over 50
due diligence projects
since 2009

Local research

M&A framework

In-market research
merged with local
insight
International
expertise, particularly
in emerging markets

Standardized and
highly efficient
processes
Unique due diligence
approach emphasizing
market potential

Quantitative
approach

Unique focus on
demand modeling
Market sizing and
forecasting using
rigorous statistical
models

Since 2009, we have completed over 50 due diligence projects globally, most of which for
recurring clients
Market Opportunity
Assessment

Experience & Approach

Target Evaluation

Case Studies

CANBACK & COMPANYS DUE DILIGENCE WORK

Project Mix by Geography

2009-present

Europe
9%
C. America and
Caribbean

U.S.

Due Diligence
Project Examples

3%

12%

37%

South America

$5 billion FMCG acquisition in Brazil

$2 billion acquisition in the Caribbean

17%
Asia

$8 billion acquisition in Mexico/Brazil

23%
Africa

DUE DILIGENCE EXPERIENCE

Since 2009, Canback & Company has completed over 50 due
diligence projects internationally

$12 billion acquisition in the United

States
JV evaluation in 8 sub-Saharan Africa
countries
Commercial due diligence for
acquisition in Turkey

Over 80% of these projects were engagements for recurring clients

The Canback & Co commercial due diligence approach involves two phases over the course of
6 to 8 weeks. Sometimes clients commission both phases, sometimes one or the other. Note
that the market opportunity assessment often is done before the kick-off
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

M&A COMMERCIAL DUE DILIGENCE TIMELINE

Phase 1: Market opportunity assessment

Phase 2: Target evaluation

Kick-off
Timing
Objectives

Key tasks

Deliverables

3 - 4 weeks

3 - 4 weeks

Assess market environment and opportunities

Develop commercial strategy

Conduct market structure, conduct and

performance analyses

Identify operational improvement opportunities and

quantify synergies

Create "as-is" demand model

Build "as-is" and "to-be" financial models

Analyze macroeconomic environment

Perform SCP analysis

Create commercial strategy for pricing, sales and

marketing, and distribution to capture market potential

Conduct in-market research

Manage due diligence across functional groups

Build "as-is" predictive demand model (10-year

forecast) to quantify market potential

Collaborate with corporate finance team and investment

banking team to build financial models

Market analysis and player assessment

Operational due diligence report

Predictive demand model

Post-acquisition strategic blueprint for next 3 years

Valuation and financial models

The two phases takes us from understanding the current situation (as-is) to finding the future
potential (to-be)
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

CANBACK & COMPANYS M&A COMMERCIAL DUE DILIGENCE FRAMEWORK

M&A commercial
due diligence

Market opportunity
assessment

StructureConductPerformance
analysis

Target evaluation

Market demand
forecasting

Commercial
strategy

Combine statistical
analyses and
managerial insights
to assess market
opportunities

Use rigorous
statistical methods
to build "as-is" and
"to-be" demand
models

Develop mediumand long-term

commercial
strategies

Manage due
diligence
processes across
functions

Collaborate with
clients and
investment banks to
build financial models

Conduct in-market
research to refine
models and
recommendations

Leverage our income

distribution database
C-GIDD to quantify
market potential

Identify operational
improvement
opportunities in sales
and marketing, as
well as distribution

Align functional
capability with
commercial strategy

Merge our predictive

demand model
seamlessly with the
financial model

As-is"

Functional
strategies

The effort starts with an as-is assessment and ends with a to-be strategy with financials

Financial
modeling

To-be"

The SCP framework is a standard approach for understanding market dynamics. It is used by
corporations and consulting firms all over the world for more than 50 years and is therefore well
tested and recognized
Market Opportunity
Assessment

Experience & Approach

Target Evaluation

Case Studies

STRUCTURE-CONDUCT-PERFORMANCE* FRAMEWORK
External influences
and shocks

Structure

Conduct

Performance

Government policies

Economics of demand

Supply conduct

Market performance

Category consumption
dynamics
Growth drivers
Penetration

Production process and scale

Route to market and channel
strategies
R&D innovation
Financial resources
Focus and leadership

Industry value and profitability

Relative market share and trends
Product/service quality

Regulation
Fiscal/Monetary planning
Taxes and subsidies
Wage regulation
Investment incentives
Trade rules
Antitrust policy

Demand conditions

Demographic trends
Consumer preference
Market growth
Price elasticity
Substitutes

Supply conditions

Technology
Communication,
transport and
infrastructure
Company legislative
environment
Raw materials
Economies of scale

Economics of supply

Level of competition
Concentration
Brand power and consolidation
Barriers to entry
Efficiency
Capacity
Product differentiation

Commercial conduct

Presence, position and

penetration
Reach and relations
Demand creation tactics

Internal performance

Productive and allocative efficiency

Logistics
Organizational effectiveness
Competitiveness
Benchmarks

Behavioral conduct
Industry chain economics
Procurement/supplier
economics
Retail share and concentration
Wholesaler economics

Pricing behavior and policies

Cartel/Collusion
Execution, ethics and objectives

Tactics and behavior patterns

Speed, innovation, service
Execution, ethics, focus

* The Structure-Conduct-Performance framework was first developed by Joe S. Bain in the late 1950s and was later popularized through Michael Porters Five Forces

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An important part of the due diligence effort are the market visits. These typically happen early in
the process. We follow a rigorous protocol to maximize productivity
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

Canback & Company market visits generate valuable data directly relevant to the acquisition
target. To ensure success, we rely on a detailed market visit protocol that has been tested and
refined over the past ten years

MARKET VISITS
Meet with key
stakeholders

Meet with local partners, government officials, and competitors

Use meeting takeaways to refine model and long-term strategy
Quantify margins for various product channels

Determine margins
across value chain

Margins used in financial and demand modeling as well as commercial

strategy formation
Collect price points by channel and product or brand

Collect price points

Understand discounts
and promotions

Examine RTM and

delivery standards

Measure price variation between channels and discover realistic prices

facing consumers
Determine how trade discounts and promotions impact retail prices and
producer margins
Evaluate effective promotional techniques
Assess RTM strengths and weaknesses
Evaluate product availability and identify strong distribution partners

Determine competitive landscape of international and local players

Profile competitors

Identify and quantify competitive trends

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A detailed as-is demand model is developed with a 10 year horizon. It is broken down by
specified characteristics like geography and channel
Market Opportunity
Assessment

Experience & Approach

Target Evaluation

Case Studies

DEMAND MODELING OVERVIEW

DATA
VALIDATION &
STRUCTURING

Category data from the client and third

party sources is cleaned and integrated
with C-GIDD

The category data is combined with

macroeconomic variables in a format
facilitating statistical analyses

The data is evaluated for normality,

colinearity, linearity in order to specify an
appropriate model

We always screen for nonsensical outliers

and remove when necessary

A demand model is used to create

projections using varying
statistical techniques including
pooled cross sectional models
and time series

Models can be granular at the

brand, pack type, channel, and
region level spanning 5 to 10
years

Macro variables
PREDICTIVE
DEMAND
MODEL

Product
demand

Price
Momentum

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Our target evaluation framework develops a commercial and functional strategies, and quantifies
the acquisition synergy opportunities and financial implications
Market Opportunity
Assessment

Experience & Approach

Target Evaluation

Case Studies

DUE DILIGENCE TARGET EVALUATION

Develop a commercial strategy to
capture market opportunities
Commercial
strategy
The functional due diligence identifies
opportunities in the following areas:

Functional
strategy

Sales and Marketing

Distribution
Supply Chain and Procurement
Production
R&D
Information Services
Corporate Affairs
Taxes
Human Resources

EXPERT VOLUME
ADJUSTMENTS

Financial
modeling

VOLUMETRIC
Brand mix
Item mix

FINANCE
ASSUMPTIONS

FINANCIAL
Revenue
EBITDA

Meet with the client to develop a

commercial strategy to capture
post-acquisition medium- and
long-term growth opportunities
Identify opportunities to enhance
pricing, sales and marketing, and
distribution strategies

Manage the operational due

diligence process across
functional groups

Collaborate with client

executives who have functional
expertise to integrate their
recommendations

Work with client and

investment bank as well as
other parties to complete "as-is"
and "to-be" financial models

Integrate our consumer demand

forecast model and due diligence
improvements into the financial
models

ACQUISITION
SYNERGIES
SAMPLE ANALYSES
Our due diligence examines
the targets "as-is"
operational capability and
develops a "to-be" strategy.
Acquisition synergy
opportunities including:
Organic growth (e.g., new
complementary products
or sales channels)
Increased customer
penetration/cross-selling
New market
segments/customers
Strategy for selecting and
entering new market
segments
Cost-reduction/margin
improvement

CASH FLOW
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Canback & Cos main role during the target evaluation phase is to develop the commercial
strategy together our clients strategists and commercial executives
Market Opportunity
Assessment

Experience & Approach

Target Evaluation

Case Studies

COMMERCIAL STRATEGY DEVELOPMENT

CAPTURE MARKET OPPORTUNITIES

GENERATE PREDICTED MARKET VOLUME

In the commercial strategy, we identify commercial improvement

opportunities to capture market potential in areas including:
Route-to market
Product portfolio
Channel strategy
Pricing
Sales and marketing

The commercial strategy lays out a post-acquisition strategic blueprint

for how to generate the market volume projected by our demand
model as well as volume from potential synergies

DEVELOP COMMERCIAL STRATEGY

We work with the client team to develop an
integrated commercial strategy that harmonizes
the different value chain components of our
client and the target. Specific questions to
consider are:

Human Resources (HR)

Finance
Information and Communication Technology (ICT)
Other Support Functions

Suppliers
Procurement
and inbound
logistics

Production

R&D

Route to
Market (RTM)

Sales
Distribution

Distributors
Marketing
Portfolio
Volume
and value
projections

Service

Consumers

Is there a need to improve current sales and

market strategy to support the change in
product and pricing strategy?
How can the target restructure the distributor
footprint and relationship to capture the
volume growth?

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The functional strategies are mostly developed by our clients executives. Canback & Cos role is
to assist with targeted analyses and to help create meaningful presentations. Our client
executives are likely to visit the targets facilities to inform their functional assessments
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

FUNCTIONAL STRATEGY SAMPLE TOPICS

Sales and
Marketing

Distribution
ENHANCE EXISTING
FUNCTIONAL CAPABILITY

After the commercial strategy

is developed, a sound
functional strategy is crucial to
ensure successful
implementation of the
commercial strategy.
We are experienced in
managing this process
across functional teams and
identifying functional
improvements.

Supply Chain
and
Procurement

Production

R&D

Human
Resources /
Organization
Other
Functions

Promotion and advertising activities

Marketing operations
Sales representative training program
Sales network

Route-to-market structure
Distributor footprint and operations
Fleet mix
Supply chain model
Facilities/offices (locations, sizes, functions)
Product vendor management

Facilities/offices (locations, sizes, functions)

Production capability
Manufacturing operations and staff
R&D process
New product development

Organizational structure
Number of employees by location and functional department
HRM policies (e.g. recruiting, comp levels, comp structure, etc.)
Incentive plans and employment contracts

IT infrastructure and support

Strategy
Finance, taxes, corporate affairs integration

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The financial modeling is typically done by our clients finance experts, with Canback & Co
providing inputs and being a sounding board
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

FINANCIAL MODELING OVERVIEW

DEMAND MODEL OUTPUT

SKU LEVEL P&L FOR TARGET COMPANY

TARGET COMPANY DCF

The demand model output can be used to

project financial results down to the SKU level
for the target companys products using
volume and price forecasts

This SKU level outputs aggregate to a

company level income statement that can be
used for valuation

We have built numerous discounted cash flow

models using our demand modeling output as
the basis for revenue projections

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Canback & Co frequently works with other professional services firms in small and large teams
to deliver on due diligence engagements
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

DUE DILIGENCE TEAM STRUCTURES

Due diligence steering committee

Investment bank(s)

Identify acquisition
targets

Operational
due diligence team

Accounting
due diligence

Legal
due diligence

The project team membership varies by acquisition

Size can range from 5 to 50 members

Provide guidance on
DCF details, valuation
Provide WACC
estimates

Canback & Co

SCP analysis before project

kickoff includes market
visit

Client team

Operate financial model

Functional expertise

Demand modeling

Provide internal data, data

from target

Project management during

target assessment phase

Set goals / priorities

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Case study 1: In early 2013, Canback & Co completed a due diligence project in Southeast
Asia. We conducted a thorough assessment of local players and partnership opportunities for
our client
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

Client: Global beverages client

Southeast
Asia due
diligence effort

Target: Large beverage player in Southeast Asia

Context: Client is looking to strengthen position in the beverage market through partnership with a large local player. We were
engaged to conduct a thorough analysis of the local market and assess JV potential through conducting commercial due diligence

Market
opportunity
assessment

M&A due
diligence
framework

Target
Evaluation

SCP
Assessment of political and economic risks, demographics
Analyze market by category, brand, and player share
With a team of 4, the entire project ran for 8 weeks, including 1 week of
in-market research
Worked on the ground and remotely with local researchers who
assisted with translation and in-market visits
Demand modeling
Model demand at the regional level, over a 10 year time horizon
Modeling done at the SKU level and includes value and volume
Demand is forecasted on both an as is (organic market growth) and
to be (organic growth with strategic initiatives) scenario

Due diligence team room

Commercial due diligence

Collaborated closely with clients management team based in Southeast
Asia
Assessed multiple local players and profiled most attractive player for
potential partnerships
Analyzed partnership opportunities for client and target local player to
jointly improve market positions, value chain performance, and
profitability
Identified specific partnership opportunities for client and local player
such as portfolio improvement, new category rollout and value chain
improvements
Value chain analysis

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Case study 2: In early 2014, Canback & Co completed a lengthy due diligence project in West
Africa, assisting our client with negotiation and valuation of a joint venture
Experience & Approach

Market Opportunity
Assessment

Target Evaluation

Case Studies

Client: Global FMCG client based in Africa

West Africa
due diligence
effort

Target: Distribution company

Context: Client is looking to enter a West African market. JV partner distribution company has been identified and parties
have engaged in substantial talks. Our key tasks were to quantify future demand, value the venture, and negotiate distribution fees

Market
opportunity
assessment

M&A due
diligence
framework

SCP
Assessment of political and economic risks, demographics
Analyze market by category, brand, and player share
Walk the ground to understand consumer behavior, establish prices,
and frame competitor conduct
Analytical framing of market using Canback toolbox
Demand modeling
Model demand for current and new product recommendations over a 10
year time horizon and 3 phases
Modeling done at the SKU level and includes value and volume
Demand is forecasted on both an as is (organic market growth) and
to be (organic growth with strategic initiatives) scenario

Due diligence meeting

Commercial due diligence

Route to market challenges and distribution gaps were identified due to
nature of JV partner business
Proposal of a new sales and service model was introduced to minimize
partner shortcomings and maximize value

Target
Evaluation

Financial modeling
Demand projections and costs were input into Canback financial model
to determine payback period and valuation
Financials led to a need for distribution fee renegotiation
Canback team present during final negotiations to offer strategic advice
and update financial model
RTM evaluation

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Canback & Company contact information

BOSTON HEADQUARTERS
Canback & Company LLC
210 Broadway, Suite 303
Cambridge MA 02139-1944
42.365869,-71.093471
Tel: +1-617-399-1300
Fax: +1-617-553-4500
Web: http://canback.com

C-GIDD

Dr Staffan Canback
Managing Director
Tel: +1-617-399-1300 Ext. 201
Cell: +1-617-818-4963
Email: scanback@canback.com

Jesse Logan
Vice President
Tel: +1-617-399-1300 Ext. 202
Cell: +1-781-640-7458
Email: jlogan@canback.com

Jonathan Mayes
Engagement Manager
Tel: +1-617-399-1300 Ext. 203
Cell: +1-412-901-8213
Email: jmayes@canback.com

Irina Blinova
Office Manager
Tel: +1-617-399-1300 Ext. 202
Cell:
Email: iblinova@canback.com

BRAZIL

JOHANNESBURG
Arshad Abba
Country Manager South Africa
Tel: +27-11-083 5890
Cell: +27-83-786 2450
Email: arshad_abba@canback.com

MEXICO

CHINA

Canback Analytics LLC

210 Broadway, Suite 303
Cambridge MA 02139
http://cgidd.com

Canback do Brasil
Rua Com. Miguel Calfat 128
1101 Vila Olimpia
So Paulo - SP 04537-080

Canback Mexico
Bosque de Ciruelos 160-7
Bosques de las Lomas
11700 Mxico, D.F.

Canback China
Suite 903B, Rongxin Tower
S. Square, Beijing W. Station
Beijing, 100055

Bobo Shen
Tel: +1-617-399-1300 Ext. 210
Email: bshen@canback.com

Giancarlo Spata
Tel: +55-11-3846 9668 or 8187 7801
Email: gfspata@canback.com

Francisco Maciel Morfin

Tel: +52-155-4354-9806
Email: fmaciel@canback.com

Dr Xingxing Liu
Tel: +86-10-8399 3522 or 3523
Email: xliu@canback.com

INDIA

SOUTHEAST ASIA

JAPAN

WEST AFRICA

Canback Research
c/o ValueNotes Database Pvt Ltd
1 Bhuvaneshwar Society
Abhimanshree Road
Pashan, Pune 411 008
Maharashtra

Canback Southeast Asia

Jl. Tiang Bendera 5 no. 2A
DKI Jakarta 11230

Canback Japan
Ginza Wall Building UCF 5F
6-13-16 Ginza, Chuo-ku
Tokyo 104-0061

STREAM Insight
7A, Ikorodu Road
Maryland
Lagos

Aniket Pargaonkar
Tel: +91-20-5601-0423 or 24
Email: research@canback.com

Teddy Purnomo
Tel: +62-812-8743 7578
Email: tpurnomo@canback.com

Shin Ito
Tel: +81-3-6338-0002
Email: sito@canback.com

Adewale Opawale
Tel: +234-710-30 51 40
Email: a.opawale@streaminsightonline.com

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