Eastland Group, a collection of businesses including Eastland Port, Eastland Network and Gisborne Airport.
Investigating the case for growth through acquisition of targets in one sector of an agricultural value chain.
Desire to better understand how changes to the overall value chain might impact the ability to unlock value.
Make small, opportunistic investments where there is room to share knowledge and skills, but do not seek to shape the industry structure.
In mid-2006, Eastland Group was investigating ways to meet its aggressive growth targets. One prospect was to make acquisitions in a sector of the agricultural value chain where they already had a presence. Temple was engaged to recommend an appropriate level of investment, in light of the risks, opportunities and Eastland’s growth aspirations.
“I knew that Temple would analyse the targets in the context of the wider value chain,” comments Matt Todd, Eastland Group’s Chief Executive. “We wanted to know if we could influence conduct in the industry to drive costs out or prices up. Are we the dog or the tail?”
Temple’s comprehensive investigation confirmed that cost savings were possible by rolling up parts of a very fragmented sector. “But they also highlighted a number of risks to profitability based on changes that could be made in other parts of the value chain,” recalls Todd. “Since then there has been some significant restructuring – and we would have been right at the mercy of it if we’d gone in bigger.”
Todd believes that Temple’s pricing model helped to ensure that his organisation received the right recommendation. “They did the work for a fixed price, based on a fixed scope. A different crew who make money by taking a margin on the deals might have been a bit more optimistic about the scale of investment we should be looking at. Other firms might have had their eyes on the next deal instead of this one. Temple’s a great fit for the five to 30 million dollar investments that we tend to look at. That’s not rich enough for the global consulting firms, but with Temple we still got guys who are ex Booz [Allen Hamilton] and McKinsey doing the work.”
Temple’s cultural fit was also important, since a lot of the key information resided in the heads of people working at the target organisations. “They’re not what I call ‘pinstripe advisors’ who don’t know how to deal with regular people. They also understand the needs of operating management teams, and how their advice will impact them and their work next week.”
Temple has since conducted a number of engagements with Eastland. Todd: “They don’t pull any punches. They stick to the facts and the science behind the case, without any smoke and mirrors. That’s what we like.”