Leading UK Fund Management Company – Project Jaguar Commercial Due Diligence

The Client was a leading independent infrastructure and private equity management company currently managing some £4.5 billion of assets. The organisation has to date been one of the largest investors in the anaerobic digestion sector and has ambitious growth plans to expand its portfolio of biomethane plants. One aspect of this expansion strategy is the acquisition of operational anaerobic digestion assets, and the process of negotiating and closing investment deals requires a robust programme of due diligence support.

The Brief

Colleagues overseeing the portfolio of managed anaerobic digestion assets approached WRM to provide commercial due diligence support in relation to an investment option on a major biomethane to grid plant in central England.  WRM were invited to provide a professional opinion on likely future feedstock volumes and gate fee estimations, likely market growth potential and market competition, and an appraisal of the surrounding catchment areas ability to service the plant.

 

The Solution

To meet the required due diligence output in a timely manner, WRM mobilised a team with expertise in market research and assessment, commercial due diligence, and corporate advisory experience on merger and acquisition activity. The project was broken down into a number of distinct workstreams.

Market Analysis – WRM provided a market assessment of waste arisings within the stipulated catchment area, and provided a professional opinion on feedstock availability, likely future gate fees, and market growth potential in response to several potential policy drivers.

A key part of the market analysis was working seamlessly with the client’s investment manager to critique and challenge the investment assumptions which had been presented in the sales information memorandum.

Competitive Positioning – The analysis of feedstock markets was supported by a comprehensive review of the competitive context of the area in line with the planning condition requirements. The assessment comprised the identification of known operational plants, in addition to planned developments presently in the planning, permitting or construction phase. Upon completion of the review, further consideration was given to how competitive dynamics might impact on the supply market, and these findings were relayed to the client team.

Consolidation of Market Assessment Findings – WRM conducted a thorough review of market assessment findings, thus raising questions and concerns that were communicated to the client’s investment team. These questions and concerns were taken up by the investment team and addressed during detailed follow-up discussions with the vendor.

Outcome – the outputs delivered by WRM provided the basis of inputs into the financial investment model developed by the client. Potential sensitivity scenarios requiring consideration were also identified. Ultimately, the work was a key input into the clients valuation of the investment opportunity.

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“WRM CONDUCTED A FULL APPRAISAL OF THIS INVESTMENT OPPORTUNITY IN LINE WITH OUR EXPECTATION. THE TECHNICAL KNOWLEDGE AND MARKET INSIGHT PRESENTED BY WRM PROVED VALUABLE IN ASCERTAINING THE COMMERCIAL RISKS AND UNCERTAINTIES ASSOCIATED WITH THE INVESTMENT OPPORTUNITY.”

Investment Analyst - Leading UK Investment Fund

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