Strategic Due Diligence with Mekko Graphics: Empowering Decision-Making
Mekko Graphics, trusted by top private equity firms, facilitates strategic due diligence with its advanced charting features such as Marimekko and Bar Mekko charts. This tool aids in market analysis, competitive positioning, and tracking market trends over time. Utilize Mekko Graphics for comprehensive insights in strategy consulting, private equity, and Fortune 500 companies' decision-making processes.
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STRATEGIC DUE DILIGENCE David Goldstein President, Mekko Graphics david@mekkographics.com
Introduction Mekko Graphics is used by over 75% of the top 25 private equity firms as identified by Private Equity International It plays a critical role in all stages of the strategic due diligence process: Market analysis Competitive positioning Customer analysis Company analysis Mekko Graphics supports chart types and features that are valuable for due diligence and not found in PowerPoint or Excel: Marimekko chart Bar Mekko chart Cascade, waterfall or bridge chart Data rows, data columns and CAGR columns that align with the chart Growth lines and comparison lines Mekko Graphics has over 15 years experience satisfying the charting needs of: Strategy consultants Private equity firms Strategy and marketing professionals at Fortune 500 companies 2
Market Analysis Use a Marimekko chart to map the market by industry vertical, identifying an unpenetrated market opportunity. 3
Market Analysis A Marimekko chart can also map the market by company size and industry vertical 4
Market Analysis Use an area chart with a CAGR column to track market trends over time CAGR 2002-2012 Total 4.7% $5.0B 4.0 Other 3% Total Market Size ($B) 3.0 2.0 Medical 14% Industrial Machinery 8% 1.0 Auto 5% 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 5
Market Analysis Use a 100% stacked bar to identify market opportunities. 6
Competitive Positioning This Marimekko chart presents market share by competitor and industry vertical. We use a data row to show overall competitor revenue. 100% All Other Industries All Other Industries All Other Industries All Other Industries Rubber, Paper & Plastic Appliances & Housewares 80 Hydraulics & Fluid Handling Fabricated Metal Products Hydraulics & Fluid Handling Consumer Goods Percent of Total 60 Electronics All Other Industries Industrial Machinery & Equipment Industrial Machinery & Equipment 40 Distribution/Industrial Supplies Distribution/Industrial Supplies Industrial Machinery & Equipment Medical Distribution/Industrial Supplies Medical Medical Medical 20 Automotive Automotive Automotive Automotive 0 Competitor A Competitor B Competitor C D E All Other Competitors Company Revenue $800M $400M $300M $200M $50M $500M 7
Competitive Positioning The Bar Mekko shows competitor cost analysis. We use color coding to differentiate countries and average lines to highlight key costs. $100 Country Current Marginal Cost: ~$80 80 USA Sweden Canada Previous Marginal Cost: ~$50 60 Unit Cost Chile Mauritania Peru 40 Australia India Venezuela 20 South Africa Brazil 0 NMDC BHPB Fortescue Metals Cleveland Cliffs Samarco CVG F/O Kumba Iron Ore Vale SA Rio Tinto CSN 8
Competitive Positioning The bubble chart contrasts earning, market share and revenue for each competitor. The competitors in the shaded area are niche players with relatively high earnings. 60% Competitor 11 Competitor 3 Competitor 9 40 Competitor 5 Competitor 2 A.C.M.E. Competitor 7 20 Competitor 16 Competitor 13 Competitor 14 0 Competitor 10 Competitor 12 Competitor 6 Competitor 15 100,000 100,000 Competitor 8 Competitor 1 Competitor 4 -20 0.01 0.02 0.05 0.1 0.2 0.5 1 2 5 10 9
Customer Analysis This Marimekko chart presents sales by brand and channel. You can spot opportunities for growing a specific brand in a sales channel. 10
Customer Analysis This Marimekko chart presents sales by customer and region. Revenue in $M Total = $121,966M $50,764M $20,021M $42,107M $9,074M 100% others Customer3 80 Customer2 60 40 Customer1 20 0 South South -East Mid-West North/North East 11
Customer Analysis A Bar Mekko is an effective way of summarizing a company s overall profitability by breaking out its components, revenue and contribution margin in this case 12
Customer Analysis A Bubble chart can be used to overlay two additional dimensions of information to the overall profitability. 80% R = 0.68 Air, Land and Water Transportation Medical and Air, Land & Water Transportation segments display outsized margins vs. what would be expected for customers of that size Electronics and Electrical Medical 70 Customer Contribution Margin Hydraulics Pneumatic and Fluid Handling Hardware Rubber Paper & Misc Plastic Products 60 Fabricated Metal Products Automotive Industrial Machinery and Equipment Appliances and Housewares 50 Segment Revenue Revenue Segment Sporting Goods, Toys & Recreational Equipment 0% 0 2 4 6 8 10 12 $14K Average Account Size ($000s) 13
Customer Analysis Use a cascade chart to track customer gains and losses. $14M $9M $59M $60M Customer1 Customer8 All Other Customer10 All Other Customer3 All Other Customer9 Customer7 $49M Customer6 50 Customer5 -$13M All Other 40 All Other 30 Customer3 Customer4 20 Customer4 Customer3 Customer2 Customer2 10 Customer1 Customer1 Customer9 0 2011 Customer Gains Customer Losses New Product Line 2012 14
Company Analysis Add a growth line and a CAGR column to a stacked bar chart to track sales by product for the last four years. CAGR +3% CAGR +3% 2,101 1,612 1,539 58,067 57,623 60,000 55,024 52,812 2,133 24,684 22,597 20,186 19,875 40,000 CAGR 09-12 -38.8% 20,000 PRODUCT 4 33,045 32,813 11.5% 31,151 30,970 PRODUCT 3 7.5% PRODUCT 2 0.2% PRODUCT 1 0 2009 2010 2011 2012 15
Company Analysis Use a Marimekko chart to break out costs by department. Total = $30,552,016 Percent of Total $1,136,232 $2,335,588 $10,162,964 $4,608,052 $4,355,556 $2,903,704 $2,083,092 $1,641,224 $1,325,604 100% CEO Office CEO Assistant Business Analysis Telephony / Comm / Web CEO Office Internati onal Purchasi ng /D i stri buti on Support Curriculum Ops Processes Development Management Management Corporate Marketing Information Technology Finance Distribution Real Estate Training Risk Tax Payroll Technical Support Training Compensation/ Benefits International Loss Prevention 80 Marketing Corporate Marketing Misc Design Recruiting/ Staffing Treasury Marketing Training Procurement Management Help Desk Aviation 60 Travel/ Sales Accounting Corporate HQ Operations Contract Adm/Legal Other Admin 40 Equipment Services Services Operations Franchisee Accounting Software Development 20 Recruiting QA Operations Construction Field 0 Brand 1 Brand 2 Finance P&D Development Human Resources Legal Other Information Technology 16
Company Analysis The profitability of Plant 1 is higher than Plant 2 even though the automotive segment is weighing it down. Plant 1 Plant 2 80% 84% 80 79% Plant 1 Plant 2 Profitability: 62% Profitability: 70% 75% 70% 70 70 Contribution Margin Contribution Margin 69% 60 58% 60 Total Custom Total Custom 57% 57% 54% 50 50 Total Custom 50% 50% Total Custom 40 40 0% Appliances/Housewares Automotive Plastic ProductsRecreational Equipment Hardware Fab Metal Products Medical Electronics/Electrical Industrial Machinery Rubber/Paper/ 0% Medical Industrial Rubber/Paper/ Hardware Electronics Transportation Automotive Plastic Products Machinery By using two Bar Mekkos side by side, the profitability across two divisions of a company can be shown while retaining the relative size of each. 17
Company Analysis The decrease in profitability among automotive customers was more than offset by the increases in industrial machinery, medical, and all others between 2011-2012. 18
Company Analysis You can also use a cascade to estimate the overall change in equity value for the investment. Equity Value Creation ($M) $137M $367M $375 Expense Reduction 350 Mgmt 300 Share Gain 250 $108M Market Growth 200 $136M 150 PE Firm Mgmt -$14M 100 PE Firm 50 0 Fees & Expenses Equity Value at Close Debt Paydown EBITDA Improvement Equity Value at Exit 19
Learn More To learn more about creating persuasive charts, download the free Mastering Chart Selection Guide, which includes a 30-day trial of the Mekko Graphics software. Questions or Comments? Join us on Facebook or Twitter and say hello!
