Due Diligence in the Biodiesel Sector
The Client
The client is a well-known mutual fund that invests in environmentally friendly companies. The client wanted HighQuest to perform due diligence on a US biodiesel producer that the client was considering for investment purposes.
Opportunity/Challenge
The client had researched possible investments in the US biodiesel industry and had found a company that it considered to be a viable alternative. The client was very interested in the company because of its technology and its strong management team. However, the client had some questions about the scalability of the company’s technology, the market risks involved with biodiesel production, and whether or not the company’s facilities currently under construction would be completed on time. The client asked HighQuest Partners to visit two of the facilities under construction, interview company management and to write a report focused on three issues:
- The scalability of the company’s technology
- Feedstock availability and risks
- Investment potential
HighQuest visited the two plants and determined that the company’s management had done its homework. The technology had proved scalable from a one million gallon plant to a ten million gallon plant and the company had tested it on its twenty million gallon plant as well. Through interviewing company management, HighQuest Partners found that the company had already locked into long-term supply for its feedstock and long term distribution agreements for the sales of its biodiesel.
Results
HighQuest’s recommended that the client invest in the company and participated in the presentation meeting that the company gave to the client. HighQuest Partners also participated in the final recommendation meeting where the client decided to invest in the company.
