The industrial gas manufacturing sector serves various industries, including semiconductors, petrochemicals, steel, and shipbuilding, prioritizing stable supply as a core operational goal. Despite being based on over a century-old air separation technology to extract nitrogen, oxygen, and argon, the industry is characterized by an oligopolistic market dominated by a few global players, relying on robust operational track records. Following a global M&A transaction in June 2017 between two industrial gas giants, divestiture of certain South Korean operations was mandated to comply with antitrust regulations.
Operational Due Diligence Focus: Sustained Cash Flow through Standalone Operations
As part of the acquisition process, Looxent conducted Operational Due Diligence, focusing on the ability of the target company to maintain stable cash flow as a standalone entity. The company’s long-term contracts—often spanning over 10 years—formed the foundation of its revenue generation. Recognized for its expertise and know-how in stable plant operations, the transition to an independent entity necessitated an evaluation of standalone operation risks, including IT infrastructure vulnerabilities.
The due diligence assessed the continuity of cash flow post-carve-out and identified improvement opportunities to support a Value-Up initiative. This early strategic direction laid the groundwork for sustained operational efficiency and revenue enhancement post-acquisition.
Post-Acquisition PMI: Developing a Value-Up Master Plan
Following the acquisition, Looxent designed a comprehensive Value-Up Master Plan to align stakeholders and drive transformative improvements across the organization. This initiative encompassed performance evaluation, core process optimization, and targeted recommendations across several dimensions:
- Top-line Growth: Revenue expansion via pricing adjustments and volume increases.
- Bottom-line Improvement: Cost reduction strategies in procurement, logistics, and production.
- Operational Excellence: Enhanced capabilities in IT and engineering to build a robust management infrastructure.
Revenue and Contract Profitability Optimization
Industrial gas pricing operates on formula-based structures, linking base prices to external factors such as electricity and labor costs. Through detailed analysis of customer contracts and sales channels, Looxent identified significant profitability variances. Collaborating with the client’s sales and management teams, the project delivered tailored recommendations for pricing adjustments and revenue growth strategies. These considerations accounted for market dynamics and structural changes, resulting in a clear roadmap for potential future improvements.
Enhancing Plant Reliability and Cost Efficiency
For utilities like industrial gas, uninterrupted supply is critical, particularly for high-impact sectors like semiconductors and petrochemicals, where disruptions can cause significant financial losses. While reliability is essential, an overemphasis on reliability at the expense of productivity can erode cost efficiency. Looxent struck a balance by focusing on the following:
- Downtime Analysis: Identifying and mitigating potential disruptions through preventive measures.
- Centralized Monitoring: Exploring remote operation and monitoring systems to enhance centralized control.
- Predictive Maintenance: Leveraging process data for predictive analytics, conducting pilot tests to validate quality improvements, cost reductions, and enhanced reliability.
Furthermore, a Sales and Operations Planning (S&OP) framework was evaluated to optimize plant operating conditions from a cost perspective, considering demand forecasts and supply projections. Key cost-reduction initiatives targeted electricity expenses, which account for a significant portion of manufacturing costs. Procurement strategies were also optimized by redefining sourcing groups and aligning with the characteristics of each supply market.
Implementation and Long-Term Planning
Looxent facilitated the development of a detailed Master Plan and execution roadmap in collaboration with stakeholders, including operational teams, executives, and shareholders. This plan quantified EBITDA improvement potential and provided actionable insights to integrate into the client’s mid- to long-term business strategies.
This project exemplifies Looxent’s expertise in navigating complex operational transitions, delivering tailored solutions that balance reliability, cost efficiency, and growth potential. The outcomes position the client for sustainable success, ensuring competitive strength and market adaptability in the evolving industrial gas sector.
The industrial gas manufacturing sector serves various industries, including semiconductors, petrochemicals, steel, and shipbuilding, prioritizing stable supply as a core operational goal. Despite being based on over a century-old air separation technology to extract nitrogen, oxygen, and argon, the industry is characterized by an oligopolistic market dominated by a few global players, relying on robust operational track records. Following a global M&A transaction in June 2017 between two industrial gas giants, divestiture of certain South Korean operations was mandated to comply with antitrust regulations.
Operational Due Diligence Focus: Sustained Cash Flow through Standalone Operations
As part of the acquisition process, Looxent conducted Operational Due Diligence, focusing on the ability of the target company to maintain stable cash flow as a standalone entity. The company’s long-term contracts—often spanning over 10 years—formed the foundation of its revenue generation. Recognized for its expertise and know-how in stable plant operations, the transition to an independent entity necessitated an evaluation of standalone operation risks, including IT infrastructure vulnerabilities.
The due diligence assessed the continuity of cash flow post-carve-out and identified improvement opportunities to support a Value-Up initiative. This early strategic direction laid the groundwork for sustained operational efficiency and revenue enhancement post-acquisition.
Post-Acquisition PMI: Developing a Value-Up Master Plan
Following the acquisition, Looxent designed a comprehensive Value-Up Master Plan to align stakeholders and drive transformative improvements across the organization. This initiative encompassed performance evaluation, core process optimization, and targeted recommendations across several dimensions:
Revenue and Contract Profitability Optimization
Industrial gas pricing operates on formula-based structures, linking base prices to external factors such as electricity and labor costs. Through detailed analysis of customer contracts and sales channels, Looxent identified significant profitability variances. Collaborating with the client’s sales and management teams, the project delivered tailored recommendations for pricing adjustments and revenue growth strategies. These considerations accounted for market dynamics and structural changes, resulting in a clear roadmap for potential future improvements.
Enhancing Plant Reliability and Cost Efficiency
For utilities like industrial gas, uninterrupted supply is critical, particularly for high-impact sectors like semiconductors and petrochemicals, where disruptions can cause significant financial losses. While reliability is essential, an overemphasis on reliability at the expense of productivity can erode cost efficiency. Looxent struck a balance by focusing on the following:
Furthermore, a Sales and Operations Planning (S&OP) framework was evaluated to optimize plant operating conditions from a cost perspective, considering demand forecasts and supply projections. Key cost-reduction initiatives targeted electricity expenses, which account for a significant portion of manufacturing costs. Procurement strategies were also optimized by redefining sourcing groups and aligning with the characteristics of each supply market.
Implementation and Long-Term Planning
Looxent facilitated the development of a detailed Master Plan and execution roadmap in collaboration with stakeholders, including operational teams, executives, and shareholders. This plan quantified EBITDA improvement potential and provided actionable insights to integrate into the client’s mid- to long-term business strategies.
This project exemplifies Looxent’s expertise in navigating complex operational transitions, delivering tailored solutions that balance reliability, cost efficiency, and growth potential. The outcomes position the client for sustainable success, ensuring competitive strength and market adaptability in the evolving industrial gas sector.