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Acquisition of Sea Odyssey. Background. Vision: We will be the most advanced innovative, reliable and trusted partner to our clients. Delivering leading edge subsea technologz solutions – pioneering to the greatest depths and beyond. ...we go deeper! - PowerPoint PPT Presentation
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Vision: We will be the most advanced innovative, reliable and trusted partner to our clients.Delivering leading edge subsea technologz solutions – pioneering to the greatest depths and beyond. ...we go deeper!
• GL Group considers the acquisition of Odyssey company. An evaluiation of the acquisition opportunity should be made
• An integration plan with potential acquisition targets to be designed
Background
Agenda
• Results of Analysis• Snyergies• Action plan• Predicted future value added• Four core messages
• Products
-RUV
-AUV under development (delays, risks)
• Existing Markets
-Oil & gas
• Potential Markets
- see Odyssee
• Products-AUVs (Selling/leasing/servicing) 15% market share in commercial market
-Strategy to increase to 35% by 2015
- AUV: 3 lines (30, 45..under trial with BP, 1030…under development..but delayed)
• Products - Communication Systems, sensing, measurement, thrusters, Software (supply chain)
•Existing Markets (# 3 in the market)-Oil & Gas (Commercial – global clients and national)-Some Ocean research-Some Subsea cables operation-Some Navy (projected growth, despite economic downturn)•Potential Markets-Non-commercial (Navy)-Civil Hydrography (emerging)-Shallow water•Clients-Existing: Oil majors and 2 locals- Potential: further local clients (Petro China, other local Oil & gas)
Subsea Innovation Odyssey SonarTec Competition
• Kongsberg
-RUV and AUV
-Well established in military sector
-Bluefin Robotics
-AUV sector
Current market position
Organization overview
• Proper integration of Sonar Tech into Sea Odyssey did not take place although merger has been done more than 3 years ago. This lead to duplication on certain function in both companies, inefficiencies and high cost.
• after taking over of Sea Odyssey, integration of all 3 companies into one unit within 6 months is imperative
Culture
• technically oriented• high level of independence, low level of control• project management is a weak
People
• There are definitely to big management team, audit of company with emphasizes to people skills is required. It will be required to conduct interview with all management and to decide on its reduction
• combining R&D of all 3 companies , Dr Cheyne is perfect candidate for head of the team due to his vast experience and esteemed careear. Also, as expert in RUV field, he will be able to push trough project for Tokyo Universities. It will remove obsticles Mr Boardman is creating in Subsea, and send signal trough both companies that most competent people will be assigned to functions.
Business processes
• project management – weak, • production – behind schedule, and at high cost at 2 different location• finances, 2 teams inefficient + subsea team. • hr function being done by management, • sales, at the moment 2 teams of 7 pple (8%). Considering favorable market....
IT
• both companies require high tech IT. Review and harmonization of IT solution and equipment need to be done trough all 3 companies.
• Sonartech, being in its core IT company would be perfect to leed the process
Potential synergies
• common market, common sales function , combined client database and contacts would enable more efficient sales
• complimenting R&D, avoiding duplication of functions, one more efficient and better equipped R&D facility
• combining productions under one roof would make it more efficient, and perhaps remove bottle neck effect
• combining admin functions (finances ,hr, management) making it leaner and more efficient
Financial - SWOTStrength
Operating section:•Solid two digit growth of 17% in average•High direct profit margins on AUV sales (about 50%)•Tangable assets
WeaknessOperating section:•Loss on increasing AUV lease business
•Initial exponential growth rates decrease quickly due to failure to meet demand due to capacity restraints and as a result declining sales versus rise of cost•Overtime work, discounts, increase receivables and penalty payments •Increasing inventories•High interest rates•Long time to cash period•High overhead cost •Not utilised synergies•Cash flow drain, high outstandings•Continuity: 30% of revenue comes from 4 major clients•Potential contract cancellations
Product profitability
Financial - SWOT
Opportunities•Strong market growth predicted for the long term•Opportunity to capitalise tangible assets•Opportunity to renegotiate loans or to inject private cheaper investment•Increase cost efficiency of Shanghai office•Relocate manufacturing line to China and utilise Shanghai office as manufacturing and sourcing base
Threats•High liquidity risk due to decreasing cash flow•Restructuring might trigger resistance, loss of key talent and impact the work morale•Reputation and brand protection – Avoidance of cancellation is critical success factor
Merge quality control
Impact
Duration to implement
6,5
2,0
5,50,0
Merge Sales
1,0
Merge offices - turn tangible assets into cash
6,00,0
Merge R+D
Merge management
5,0
1,0
7,0
1,5 Consolidate Tokyo project with Sea Odyssey 4500
2,5
7,53,53,02,52,01,5
Merge Administration
0,5 4,54,0 8,0
0,5
Merge production3,0
Synergy matrix
0
1
2
3
4
5
6
7
8
9
10
Impact10,09,59,08,58,07,57,06,5
Duration to fix
0,0
Reduction in Admin capacities (10-5)
Reduction in overhead (Management 15-5)
Cease unprofitable lease business
Negotiate lower interest rates
Shorten invoice settlement period
Reduction in OT work
Increase manufacturing capacity
6,05,55,04,54,03,53,02,52,01,51,00,5
Critical actions for company turn around
Very long
Very short
Project plan2012 2013 2014 2015
Business Process integration
Integrate supply chain and manufacturing
Increase manufacturing capacity
Integrate support functions
Resolve Cash Flow problem
Consolidate Product Portfolio
Change management – Communication concept, Workshops, Change agents
Major risk
• Cancellation of projects or loss of clients due to manufacturing capacity shortage may cause cash flow issues and bankrupcy
Markets Clients
• Business Segments
-Oil & Gas
-Navy (Non commercial)
-Hydrographic
-Shallow Water
• Oil & gas
•Navy
•Hydrographic
Product Lines
• Products
-AUV production
-AUV leasing
-AUV technology licensing
-AUV services
Field of play – the core
Added value to GL Group due to utilisation of synergies
Addi t i onal turnover 2014 2015 2016 2017Subsea 2% 2% 2% 2%GL 1% 3% 4% 4%Odyssey + Sonar Tec 1% 3% 4% 4%
Cost synergi es/ savi ngsSubsea - 10% - 2% - 2% - 2%GL 0% 0% 0% 0%Odyssey + Sonar Tec - 12. 34% - 1% - 1% - 1%
Current and future value
Appreciation of value of other GL Group companies not considered here
Not more than:
Not less than:
Next steps
• Approve acquisition budget of not less than 28 mill. EURO• Build Integration team• Break down and implementation of integration plan
Four core messages at the end
• Acquisition will create positive effects on all business lines of GL Group
• Cash Flow and manufacturing are core issues with high risk to cause bankrupcy. Cash injection from mother company might linder this short term operational risk.
• The acquisition will secure and protect market share in the long term key markets of GL Group
• Merger is a strategic fit with GL Groups strategy