Our method
A manufacturing company cannot be understood by reading the financial statements alone, nor by walking the shop floor alone. The real problems almost always sit where the two meet: a margin that does not add up because product cost is calculated wrongly, a stated capacity the machines cannot deliver, an investment made for the tax incentive rather than for the plan. Our job is to read figures, plant, technology and organisation together, with one person accountable for the result.
Principles
They apply to every engagement, whatever the entry point.
We work from three sources: interviews with the people who run the company, work on the shop floor, and documents. A statement that none of these sources confirms is reported as such. When the sources disagree, the gap is information in itself, and we report it.
A technical or organisational problem matters to decision makers once its cost is known. For every finding we state, where technically defensible, its effect on margin, cash, investment, risk or timing.
We do not deliver a snapshot. Every piece of work closes with the actions to take, in what order, who takes them, by when, and how to measure that they have been done.
Diagnostic
The starting point of most engagements. It takes 4 to 8 weeks.
It runs in three phases and ends with a debrief meeting with the owners.
| Phase | What we do | What it produces |
|---|---|---|
| Reading the figures | Financial statements for the last three years, interim accounts, product costs, production data | Where margin is made and lost, how cash moves |
| Work on the shop floor | Days on site: flows, bottlenecks, machines, systems, organisation of functions, interviews | What can and cannot support growth |
| Synthesis and plan | Figures and shop floor cross-checked, priorities ranked by economic effect and cost | Written report, ninety-day plan, debrief meeting with the owners |
Due diligence
For those buying or investing in a manufacturing company. 2 to 4 weeks from data room access.
Financial, legal and tax reviews describe what is booked and contracted. What remains to be verified is what produces the result: the plant, the processes, the equipment, the key people and the supply chain. That is where deferred investment, overstated capacity, unreliable product costs and dependencies discovered after closing are hidden.
| Area | What we check | Why it matters to the deal |
|---|---|---|
| Plant and machinery | Condition, age, utilisation, maintenance, deferred and required investment over the next 36 months | Value and cash requirement |
| Production capacity | Actual capacity against stated capacity, constraints, room for growth | Robustness of the business plan |
| Costs and margins | Bills of materials, routings, product cost, margins by product, line and customer | Reliability of EBITDA |
| Processes and organisation | Flows, planning, ERP and other systems, scrap, delegation | Integration and synergies |
| Quality and certifications | Quality system, inspection, non-conformities, sector certifications | Risk on customers and orders |
| Compliance and safety | Machinery safety, CE documentation, transition to Regulation (EU) 2023/1230 | Cost of bringing into compliance |
| Dependencies | Critical suppliers, customer concentration, key people, ownership of software and know-how | Continuity after closing |
| Phase | Activity | Indicative duration |
|---|---|---|
| 1. Set-up | Investment thesis, weighting of areas, question list, document request, interview plan | 2 or 3 days |
| 2. Document review | Technical data, costs, maintenance, quality, technical contracts | 3 to 5 days |
| 3. Site work | 1 to 3 days on site with interviews, inspection, photographic survey; visits to critical suppliers if needed | 1 or 2 weeks |
| 4. Report | Assessment, quantification of findings, presentation to decision makers | 3 to 5 days |
When the deal timetable requires it, a review limited to critical findings can be completed in 5 working days on a reduced scope.
Each area in scope receives a weight set at the outset, according to the investment thesis: if the buyer is acquiring production capacity, plant and capacity weigh more; if the buyer is acquiring technology, know-how and software ownership weigh more. For each area the matrix records five distinct elements.
| Element | Content |
|---|---|
| Finding | What we found |
| Evidence | From which source, interview, shop floor or document, and with what confirmation |
| Economic effect | Impact on value, cash, margin or timing, quantified or estimated as a range |
| Uncertainty | How solid the estimate is and what would make it more solid |
| Action | Condition to put in the contract, investment to plan for, or action in the first hundred days |
The overall score supports the recommendation but does not replace it: the final judgement is always argued in full.
Sale
12 to 24 months before the transaction, on the operating levers that protect value.
By the time a sale process starts, much of the price has already been set by the quality of the figures, the plant and the organisation. On 2 million of EBITDA, one turn of multiple is worth 2 million of enterprise value. We do not promise the multiple: we work on the operating levers that defend it.
| What pushes the price down | Lever | Expected effect |
|---|---|---|
| Unreadable margins, product cost "from memory" | Actual cost by product, line and customer | More defensible EBITDA |
| Loss-making products and customers hidden in the average | Exit from negative items, selective repricing | Higher and more readable margin |
| Non-recurring costs mixed with ordinary operations | Separation of exceptional and non-arm's-length costs | More credible adjusted EBITDA |
| Dependence on the owner | Delegation, written processes, transfer of know-how | Perceived continuity after the sale |
| Dominant customers or irreplaceable suppliers | Diversification of customers and critical suppliers | Fewer earn-outs and warranties requested |
| End-of-life equipment, maintenance backlog, compliance that cannot be demonstrated | Targeted investment and compliance plan | Fewer discounts in negotiation |
| No budget, no management control | Reporting, budget, KPIs, adequate organisational structures | Faster and more consistent due diligence |
| Phase | What we do | Duration |
|---|---|---|
| 1. Diagnostic | The company seen through the buyer's eyes, levers quantified, value creation plan | 6 to 8 weeks |
| 2. Execution | Fractional presence, accountability on agreed KPIs, work on costs, investment, supply chain, processes and organisation | 9 to 18 months |
| 3. Transaction readiness | Industrial documentation for the data room, evidence, preparing management for questions and site visits | 2 to 3 months |
| 4. Through to closing | Handling the buyer's due diligence on the industrial side, documented answers to technical findings | until closing |
Lydius does not replace the deal adviser: the adviser runs the process, manages the counterparties and negotiates the contract. We work on the company, so that its operating performance can be verified and defended.
Integration
Due diligence finds the problems; closing does not solve them. The value paid at closing is realised afterwards.
| Period | Phase | What happens |
|---|---|---|
| Days 0 to 30 | Start-up | Plan validation, baseline KPIs, governance, area owners, immediate actions and urgent risks |
| Days 30 to 100 | Execution | Work on priority areas, regular progress reviews, KPIs assigned to people |
| Months 3 to 12 | Consolidation and handover | Fractional technical or operations leadership where needed, development of internal people, handover to the permanent organisation |
The mandate can start from our own due diligence or from other advisers' reports: the first step is always to turn findings and investment thesis into an orderly work plan.
Independence
A non-disclosure agreement before receiving any information. Never an engagement for both sides of the same transaction. No brokerage and no sale mandates: our scope stays industrial and operational. Our fee does not depend on the outcome of the transaction. We do not put clients with conflicting interests in touch with each other. The specialists we involve work under our responsibility and with the same confidentiality obligations.
Accountability
Every engagement has a single lead, Andrea Cardellino, from proposal to delivery. When the scope requires it we bring in selected specialists: finance and control, quality and compliance, automation and industrial cybersecurity, legal aspects of intellectual property. The person who signs the proposal is accountable for the work.
The first step is a forty-five minute meeting, with a preliminary reading of your latest filed financial statements, at no cost.
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