Leading UK Fund Management Company — Project Apple Commercial Due Diligence

The Client was a leading independent infrastructure and private equity management company with some £4.5bn of assets under management. 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 digestions assets, and the process of negotiating and closing investment deals requires in-depth and robust due diligence support.

“THE BLEND OF TECHNICAL KNOWLEDGE AND MARKET INSIGHT OFFERED BY THE WRM TEAM WAS PARTICULARLY VALUABLE IN UNDERSTANDING COMMERCIAL RISKS ASSOCIATED WITH THIS INVESTMENT OPPORTUNITY”.

Investment Manager - Leading UK Investment Fund

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 the North of England. The client required WRM provide an opinion on feedstock availability, the competitiveness of the asset, and also on digestate off-take arrangements, and the capacity of the local landbank to service the plant.

The Solution

In order to meet the required due diligence output, WRM mobilised a team with expertise in market research and assessment, agronomy and corporate advisory on M&A activity.

Market analysis – WRM provided a generic market assessment of the regional waste market and provided a professional opinion on potential market growth forecasts in response to a number of foreseeable policy drivers. A key part of the market analysis was critiquing and challenging vendor growth assumption which had been presented in the sales information memorandum.

Competitive positioning – the analysis of feedstock markets was supported by a review of the competitive context in a defined haulage distance of the plant. This included known operational plants, as well as proposed plants that are presently in the planning, permitting, or construction stages. Upon completion of the review, WRM gave further consideration to how the competitive picture impacted on the supply market.

Digestate market assessment – WRM drew on our skills in agronomy to review landbank capacity and risks associated with digestate management from the plant. This work ranged from assessment of storage capacity through to checking application rate and landbank records from existing operations.

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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