OPERATIONAL ASSESSMENT AND MILL AUDITS

CASE STUDIES

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Mass Timber Manufacturing Acquisition Due Diligence—The Beck Group recently assisted a confidential client by completing a third-party appraisal of a mass timber manufacturing operation. Beck’s tasks included a site visit to assess the state of the equipment, a valuation of the business as a going concern, and recommendations about the operation’s strengths, weaknesses, and opportunities for improvement. Regarding the going concern valuation, Beck used an income approach (using revenue multiples and EBITDA multiples) and comparisons to benchmark companies.

 

The mass timber manufacturing supply chain is an area of Beck expertise based on nearly 10 years of involvement in the International Mass Timber Conference as presenters, International Mass Timber Report authors, and other project work similar to this one. The client will improve their competitive capacity in this fast-growing market segment.

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Wisconsin Hardwood Mill Operations Audit—Beck assisted a packaging company owned by a private equity group in an ongoing effort to improve the efficiency of milling operations by better matching mill outputs to the needs of the associated packaging operations. Beck’s role included visiting the mills and interviewing staff to identify operational issues. The safety culture and safety standards were also reviewed at each facility. Based on the visits and analysis of key operational metrics, Beck provided recommendations to improve production, safety, and profits. This included changing operating postures (number of shifts/hours) to increase profitability; changes to staffing levels in both the production and maintenance portions of the operation. Additionally, synergies between mills were highlighted which streamlined the output of multiple locations.

 

Beck utilized contract expertise as well as Beck staff’s knowledge to execute this audit. The experience provided by this team was appreciated by the client’s staff as the outside perspective made them aware of issues they had not seen previously.

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Confidential Client—A confidential client retained The Beck Group to complete a third-party operational assessment. Our work included a site visit by three Beck staff members who observed the operation. While on site, our team assessed key operating metrics such as piece counts at machine centers, productivity rates, staffing levels, and safety. Our analysis, conclusions, and recommendations were documented in a written report. Our staff also reviewed the study and recommendations with the client’s management team.

 

Our staff members have toured hundreds of forest products manufacturing operations and have the expertise to quickly identify issues that may go unnoticed by staff who have become accustomed to the “way things are done around here.” Our client’s board of directors is now in a stronger position to provide guidance to management.

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Assistance for Growth in Current and New Facilities – Beck assisted a confidential client who was seeking to increase production at their current facility and to ensure planning for a new facility design would result in an efficient operation and allow for future growth. Beck’s role included a site visit to assess the current operation and the planned operation. Also, while on site, Beck assessed the operation’s safety practices. The client was experiencing rapid growth and wanted to capitalize on the opportunities available utilizing their current facility until a larger facility was constructed. Beck recommended realignment of machine centers to allow for more efficient handling of products as well as increase worker safety. New handling systems were recommended to reduce manual materials handling. For the new facility, Beck recommended equipment types, material transfer methods, and equipment alignment to allow for efficient production. Finally, site plans were evaluated to ensure that trucks could easily deliver and receive materials at the new facility.

 

Beck utilized its own staff and a contract engineer to evaluate opportunities for this project. Recommendations were made in conjunction with architects designing the new facilities. Beck was able to expose the client and architects to technologies they did not know were available.

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Acquisition Due Diligence—The Beck Group assisted an investor interested in acquiring a wood products manufacturing complex that included a sawmill and plywood operation. Beck’s tasks included visiting the site to observe and evaluate the operations at work, developing a valuation of the business as a going concern (including evaluating the company’s projected income and earnings multiples based on historical financial performance relative to comparable publicly traded companies), comparing the competitive strengths and weaknesses of the operations, developing high-level estimates of capital investment that would likely be required following the acquisition, and providing commentary and analysis for potential lenders and investing partners. 

 

Because of Beck’s expertise in forest products manufacturing operations, our client was able to develop an acquisition bid based on accurate data developed by a neutral third party.

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Acquisition Due Diligence of a Specialty West Coast Lumber Producer—This project was undertaken at the request of a confidential client to assist in the evaluation of a specialty lumber producer with multiple West Coast manufacturing locations. A first step in the acquisition due diligence was an in-depth supply and demand evaluation of the timber resources and competition in the region surrounding the mill operations. This was followed by an evaluation of the overall business including an assessment of the sawmill operations, management reporting systems, management team and workforce, and facility maintenance/capital expenditure plans and opportunities. The due diligence also included a critical review of the company’s financial projections and an assessment of the company’s competitive position for log procurement, including development of return to log values for the company’s specialty product line in comparison to mills competing for the same timber resource producing other lumber products. Additionally, Beck staff provided comparable transaction values from a database of prior sawmill transactions maintained by The Beck Group.

 

The acquisition was completed, and the company continues to grow and improve its new business.  Beck staff members were able to utilize their extensive experience in the specialty lumber business including knowledge of markets, manufacturing economics of a variety of different product lines, and regional timber supply and demand. Additionally, The Beck Group maintains a database of historic sawmill transaction values that is useful in establishing the fair market value of a sawmill business.

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Business Valuation—The Beck Group provided an assessment of value for a wood products manufacturing complex that included a sawmill and biomass power plant. Beck’s tasks included an on-site visit to observe the operation, review of historical production and financial records, interviews with key management personnel, and assessment of the operation’s competitive position. This enabled us to develop a going concern valuation of the company based on past financial performance and comparison with relevant publicly traded companies, future earnings potential, and comparison with a database of comparable sawmill transactions.

 

Beck’s knowledge of forest products manufacturing operations combined with our business valuation services allowed us to effectively and efficiently provide a third-party view of the client’s operations and business value.

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