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Acquisition of Sea Odyssey

Acquisition of Sea Odyssey. Background. Vision: We will be the most advanced innovative, reliable and trusted partner to our clients. Delivering leading edge subsea technologz solutions – pioneering to the greatest depths and beyond. ...we go deeper!

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Acquisition of Sea Odyssey

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  1. Acquisition of Sea Odyssey

  2. Background • Vision: We will be the most advanced innovative, reliable and trusted partner to our clients. • Delivering leading edge subsea technologz solutions – pioneeringto the greatest depths and beyond. ...we go deeper! • GL Group considers the acquisition of Odyssey company. An evaluiation of the acquisition opportunity should be made • An integration plan with potential acquisition targets to be designed

  3. Agenda • Results of Analysis • Snyergies • Action plan • Predicted future value added • Four core messages

  4. Subsea Innovation Odyssey Competition SonarTec Current market position • Products • AUVs (Selling/leasing/servicing) 15% market share in commercial market • Strategy to increase to 35% by 2015 • AUV: 3 lines (30, 45..under trial with BP, 1030…under development..but delayed) • Products • RUV • AUV under development (delays, risks) • Existing Markets • -Oil & gas • Potential Markets • - see Odyssee • Products • - Communication Systems, sensing, measurement, thrusters, Software (supply chain) • Kongsberg • RUV and AUV • Well established in military sector • Bluefin Robotics • AUV sector • Existing Markets (# 3 in the market) • Oil & Gas (Commercial – global clients and national) • Some Ocean research • Some Subsea cables operation • Some Navy (projected growth, despite economic downturn) • Potential Markets • Non-commercial (Navy) • Civil Hydrography (emerging) • Shallow water • Clients • -Existing: Oil majors and 2 locals • - Potential: further local clients (Petro China, other local Oil & gas)

  5. Organization overview • Proper integration of Sonar Tech into Sea Odyssey did not take place although merger has been done more than 3 years ago. This lead to duplication on certain function in both companies, inefficiencies and high cost. • after taking over of Sea Odyssey, integration of all 3 companies into one unit within 6 months is imperative

  6. Culture • technically oriented • high level of independence, low level of control • project management is a weak

  7. People • There are definitely to big management team, audit of company with emphasizes to people skills is required. It will be required to conduct interview with all management and to decide on its reduction • combining R&D of all 3 companies , Dr Cheyne is perfect candidate for head of the team due to his vast experience and esteemed careear. Also, as expert in RUV field, he will be able to push trough project for Tokyo Universities. It will remove obsticles Mr Boardman is creating in Subsea, and send signal trough both companies that most competent people will be assigned to functions.

  8. Business processes • project management – weak, • production – behind schedule, and at high cost at 2 different location • finances, 2 teams inefficient + subsea team. • hr function being done by management, • sales, at the moment 2 teams of 7 pple (8%). Considering favorable market....

  9. IT • both companies require high tech IT. Review and harmonization of IT solution and equipment need to be done trough all 3 companies. • Sonartech, being in its core IT company would be perfect to leed the process

  10. Potential synergies • common market, common sales function , combined client database and contacts would enable more efficient sales • complimenting R&D, avoiding duplication of functions, one more efficient and better equipped R&D facility • combining productions under one roof would make it more efficient, and perhaps remove bottle neck effect • combining admin functions (finances ,hr, management) making it leaner and more efficient

  11. Financial - SWOT • Weakness • Operating section: • Loss on increasing AUV lease business • Initial exponential growth rates decrease quickly due to failure to meet demand due to capacity restraints and as a result declining sales versus rise of cost • Overtime work, discounts, increase receivables and penalty payments • Increasing inventories • High interest rates • Long time to cash period • High overhead cost • Not utilised synergies • Cash flow drain, high outstandings • Continuity: 30% of revenue comes from 4 major clients • Potential contract cancellations • Strength • Operating section: • Solid two digit growth of 17% in average • High direct profit margins on AUV sales (about 50%) • Tangable assets Product profitability

  12. Financial - SWOT • Threats • High liquidity risk due to decreasing cash flow • Restructuring might trigger resistance, loss of key talent and impact the work morale • Reputation and brand protection – Avoidance of cancellation is critical success factor • Opportunities • Strong market growth predicted for the long term • Opportunity to capitalise tangible assets • Opportunity to renegotiate loans or to inject private cheaper investment • Increase cost efficiency of Shanghai office • Relocate manufacturing line to China and utilise Shanghai office as manufacturing and sourcing base

  13. Synergy matrix Duration to implement 3,0 Merge production 2,5 2,0 Merge R+D 1,5 Consolidate Tokyo project with Sea Odyssey 4500 Merge offices - turn tangible assets into cash Merge Administration 1,0 Merge management Merge Sales 0,5 Merge quality control 0,0 Impact 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 5,5 6,0 6,5 7,0 7,5 8,0

  14. Critical actions for company turn around Duration to fix Very short Cease unprofitable lease business Reduction in OT work Reduction in overhead (Management 15-5) Shorten invoice settlement period Increase manufacturing capacity Reduction in Admin capacities (10-5) Negotiate lower interest rates Very long Impact 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0 5,5 6,0 6,5 7,0 7,5 8,0 8,5 9,0 9,5 10,0

  15. Project plan 2012 2013 2014 2015 Resolve Cash Flow problem Integrate support functions Increase manufacturing capacity Integrate supply chain and manufacturing Consolidate Product Portfolio Business Process integration Change management – Communication concept, Workshops, Change agents

  16. Future key assets

  17. Major risk • Cancellation of projects or loss of clients due to manufacturing capacity shortage may cause cash flow issues and bankrupcy

  18. Field of play – the core Product Lines Markets Clients • Business Segments • Oil & Gas • Navy (Non commercial) • Hydrographic • Shallow Water • Products • AUV production • AUV leasing • AUV technology licensing • AUV services • Oil & gas • Navy • Hydrographic

  19. Added value to GL Group due to utilisation of synergies

  20. Current and future value Appreciation of value of other GL Group companies not considered here Not less than: Not more than:

  21. Next steps • Approve acquisition budget of not less than 28 mill. EURO • Build Integration team • Break down and implementation of integration plan

  22. Four core messages at the end • Acquisition will create positive effects on all business lines of GL Group • Cash Flow and manufacturing are core issues with high risk to cause bankrupcy. Cash injection from mother company might linder this short term operational risk. • The acquisition will secure and protect market share in the long term key markets of GL Group • Merger is a strategic fit with GL Groups strategy

  23. THANK YOU FOR YOUR ATTENTION

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