Assessing M&A Risks and Synergies Before Investing in Debt
How we helped a $2.5 billion roofing distributor assess risks, uncover synergies, and secure financing for a transformative acquisition.
Case Study Snapshot
Construction Materials
Duration
2 Weeks
Team
1 Managing Director
1 Vice President
Services
FDD
M&A Analysis
The Situation
A $2.5 billion revenue distributor of residential and commercial roofing materials, siding, waterproofing, and windows was financing the acquisition of a $1.2 billion revenue competitor.
The combined company, with a 16% market share, would become the second-largest player in the North American roofing distribution market, surpassing its closest competitor by $1 billion in revenue.
The client needed a comprehensive due diligence process to assess integration risks, cost synergies, and market dynamics before proceeding to invest in the acquisition financing.
The client needed a comprehensive due diligence process to assess integration risks, cost synergies, and market dynamics before proceeding to invest in the acquisition financing.
Our Approach
Our due diligence approach focused on:
Integration Risk Assessment: Evaluated supply chain disruptions, IT and systems integration risks, logistics challenges, and regulatory compliance.
Cost Savings & Synergy Opportunities: Identified purchasing synergies, warehouse consolidation, and headcount reductions to quantify operational efficiencies.
Cash Cost Analysis for Synergies: Assessed one-time costs for facility closures, workforce reductions, ERP integrations, and IT upgrades.
Market Demand & Growth Drivers: Analyzed housing market trends, storm activity, and new construction growth to forecast long-term demand.
Working Capital & Financing: Evaluated seasonal working capital fluctuations to ensure sufficient liquidity post-acquisition.
The Results
The due diligence process confirmed the acquisition’s attractiveness, highlighting:
Stable cash flow driven by non-discretionary spending on roofing materials.
Low-risk cost savings opportunities, with purchasing synergies achievable in the near term.
Manageable integration risks due to improved geographic diversification and limited operational overlap.
Strong free cash flow generation, supported by low capital expenditure requirements.
Our analysis provided the client with the confidence to proceed with financing the transaction, positioning them for attractive returns on their debt investment.
See for yourself
To really see the Magic of North Castle, you’ve got to see it in action. Our team would love to show you how to assess risks, uncover synergies, and secure financing for a transformative acquisition.