Analysis of Strategic Alternatives for Automotive Component Business
The Client
Our client is one of the world’s largest manufacturers and marketers of lighting products and fixtures.
The Challenge
The client has a division that provides a low technology component to the automotive industry experiencing a shrinking customer base and declining revenues and profit margins. While our client offered a product considered “best-in-class” by one of the major U.S. auto manufacturers, the company did not have sufficient marketing presence to build relationships beyond its single client.
Our client sought our recommendation and evaluation of their four alternatives:
- Exit the business
- Sell the business
- Pursue strategic partnership alternatives
- Continue as a stand-alone business
The Solution
The team at HighQuest performed an analysis of the automotive industry, focusing on the sub-sector in which our client’s business was engaged. We identified potential partners and buyers of our client’s business, and considered what each might bring to the table.
We visited the company’s production facility, interviewed senior management and performed our own due diligence on the particular segment of the auto industry. Based on interviews and our independent analysis, we were able to put summarize the best, worst and likely outcomes associated with each of the four alternatives. While much of information was derived from conversations with company management, we organized their feedback in a unique and concise manner that enabled management to simplify their decision making process.
The Results
As evidence of management’s confidence in our work, the company followed HighQuest’s recommendation to partner with a leading player in the space and develop a next-generation product. The partner had marketing relationships and contracts with leading OEMs that our client lacked, and our client offered a proven ability that had eluded the partner to develop a high quality product in a timely fashion.
The long-term outcome of pursuing our recommended strategy will not be fully known until at least one year from formation of the partnership.
