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Development of a Mechanical Engineering Holding

Situation

  • The client was a large mechanical engineering holding, uniting around 20 enterprises in Kazakhstan. The holding mainly consisted of producers of equipment for oil and gas, rail and the defence industries. The largest part of the holding was struggling, with negative financial indicators
  • In an effort to stay afloat, the companies began trying to diversify into related industries, attempting to produce consumer goods. This did not allow them to exploit economies of scale
  • The holding was – in cold reality – uniting disparate, poorly-managed assets, with the effect that value was being destroyed
  • The holding’s new management set the aim of achieving significant growth in value using the existing asset base
  • One of the possibilities the management wanted to assess for potential to grow the holding was engineering

Goal

  • To identify the best development direction for the engineering using the existing assets
  • To develop a long-term development strategy for the holding which includes restructuring of the engineering assets and a refocus on to the business’s engineering
  • To identify the optimal organizational structure allowing for control over the holding to be increased
  • To develop a priority action plan to realize the strategy

Our approach

  • Due to the project’s limited time and budget, the ‘express audit’ approach was used on the holding’s companies
  • On the basis of the developed templates, information on the current activities, financial condition, and the problems experienced by the various entities was collated and assessed
  • Using the analyzed information, a brainstorm with the client selected three restructuring options which were further analyzed for their advantages and disadvantages
  • Selection criteria was developed and the optimal restructuring choice made for the assets from the point of view of the shareholders, management and other interested parties
  • Focus was placed on researching new possibilities to grow the engineering business
  • Analyze the options for development of the engineering market in Kazakhstan, Russia and other priority markets
  • Identifying the sectors in the analyzed countries in which demand for engineering services increased
  • Analyze successful engineering business models for companies in Russia and abroad
  • Identifying an optimal engineering business model based on profitability, proposed value, strategic control, priority markets, the business model, scale of operations and sources of competitive advantage
  • A financial model was built to evaluate the different restructuring options and the potential to create value via engineering in the holding
  • Identified a long-term development strategy for the holding and formulated the steps and key actions for long-term development
  • Developed and recommended to the client a high-level organizational structure describing the key functions and zones of responsibility for different departments

Results

  • A long-term strategy for the holding was developed, directed at increasing value and including: restructuring the assets, increasing the competitiveness of the enterprises, and developing new directions for engineering  
  • The evaluation of the holding’s potential value was provided
  • Developed an entire organizational structure to guarantee management control over the holding
  • A priority action plan for management was identified to achieve the strategy 

 

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