The Asian EMS provider claimed to be a top-five supplier to GE with a verified $150 million in total revenue. Nearly 30 percent of this revenue came from GE. This EMS provider wanted to be sold and three different private equity groups had asked me to review the firm’s memorandum of confidentiality document the seller’s banking group presented.
Company competitive overview in EMS market, investment merits, product and services offering, customers, sales and marketing, facilities and equipment, management team, historical financial results, balance sheet and financial projections were all part of the analysis.
Disclosure v discovery
The contract manufacturer claimed to have ODM differentiation in its ‘concept-to-design’ capabilities but this CM had no proprietary software or industry-unique and patented design or assembly processes.
Reviewing some OEM customer programs in detail revealed no patent competitive intelligence offered by the provider, few truly challenging design breakthroughs in customer programs and, little variation on the EMS provider’s ability to serve demands for niche technologies developing in non-traditional, high-growth emerging EMS industry markets like medical, auto, aerospace, industrial…
The provider also claimed end-to-end solutions but lacked mature build-to-order (BTO) and configure-to-order (CTO) capabilities plus, uncovering back-end services like reverse logistics and in-depth return materials authorization (RMA) proved elusive.
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Sheet metal and plastics mold injection presented as vertical offerings were only partially true, with the bulk of revenues from these services coming from third-party vendor partnerships.
Careful review of direct and indirect labor revealed a high amount of contract employees inadequately supported by proper marketing, sales, business development, and program management to drive growth projections.
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