Bank of America - EMS

Division: Phoenix Management Services


Client

Phoenix Management Services, Inc. evaluated the following two companies for an acquisition transaction on behalf of the senior lender - Bank of America. Located in Attleboro, Massachusetts, EMS is the largest producer of clad metals in North America. Cladding is the process of joining two or more metals or alloys by a roll-bonding and thermal treatment process that produces a bond at the atomic level. EMS develops, manufactures and markets specialty clad material, thermostatic bimetal and electrical contacts that are used in devices such as motor protectors, thermostats, appliances and cookware. Some of its specialty-clad materials are also used in the auto and truck industry, telecommunications and architectural industries. Located in Hamburg, PA, Hood is a nickel alloy specialty product manufacturer engaged in the business of metal cladding, cold rolling, stripping and stamping of nickel alloys and metal strips. Hood products are sold to customers in the electrical safety, electronics, automotive and aerospace industries. Primarily, these metals are used in the production of circuit breakers, but also include measuring and control instruments, as well as, temperature control switches and valves.

Problem

Bank of America was evaluating the prospects of providing a $40 million credit facility to one of its current borrowers. Phoenix Management Services, Inc. was engaged by the lender to conduct a business review of the financial forecast and business plans of BoA’s current borrower as it considered the acquisition of its next largest competitor.

Solution

Phoenix conducted a due diligence review and business assessment of the Companies and proposed transaction including but not limited to the following items:

  • Review and validate financial plans, historical operating performance and any inconsistencies with regards to budgets/plans and actual historical operating performance
  • Review and understand the assumptions and strategies associated with the Transaction
  • Examine the resulting combined Companies’ operating budget and key risks and opportunities
  • Evaluate and review the Companies’ internal financial systems, controls and processes pre and post acquisition
  • Evaluate and validate the Companies’ EBITDA add-backs for the most recent 12-month period and the previous two fiscal years, with particular emphasis on the non-recurring nature
  • Evaluate and validate the Companies’ financial forecast
  • Identify other areas for operational or financial improvement with specific emphasis related to EBITDA
  • Assess and evaluate the purchase contracts with major suppliers of raw materials
  • Examine the increased price elasticity that may result post transaction and the ability to pass along price increases to the combined entities existing customer base
  • Conduct a site visit and upon any potential CAPEX requirements post Transaction

Upon presentation of Phoenix’s analysis and report, the acquisition was successfully conducted with full support of the senior lender including the securing of a new $40 million credit facility.