Use case - Z - D'Ornano + Co

Objective

New Investment

Investment stage

Growth

New Business model

SaaS [Horizontal Applications]

Case Study

D’ORNANO + CO. PERFORMED HYBRID GROWTH DILIGENCE ON A LEADING RESTAURANT TECH PLATFORM WISHING TO CONSOLIDATE THE EUROPEAN MARKET

The investor intended to complete a Growth investment in a Restaurant Tech SaaS platform enabling reservation, venue management, CRM and mobile payment. Because it worked with physical restaurants, it was negatively impacted by pandemic lockdowns. But eventually restaurants began to embrace digital transformation and the startup’s strong reputation and high customer satisfaction accelerated sales and catalyzed growth.

Challenge

Despite many hurdles, the company was adjusting to becoming a scaleup and managing and expanding business and headcount. Marketing efforts were increasing as was the customer base. Restaurant Tech had finally become a surging sector, and a SaaS solution was particularly attractive to younger restaurant owners. The Private Equity Fund wanted to use the startup as the foundation of a consolidation strategy at European level. This would present new challenges in terms of acquisitions and integrations, while still managing a growing core business. Traditional due diligence is backward-looking and, for High-growth and Disruptive companies, does not provide comfort on a company’s ability to deliver sustainable growth and create value. Also, because traditional due diligence takes a broader industry approach rather than a more precise business model approach, it can only generate a surface-level view of a company’s financial health with a limited picture of an asset’s strengths and weaknesses to consider in the investment process.

Solution

The investor retained D’Ornano + Co. to apply its Hybrid Growth Diligence for PE Growth product which identifies in a short timeframe any deal-breaking items, secures key aggregates, challenges the existence of a clear path to profitability, and provides actionable analytical insight to support the investor’s decision. Going beyond classic due diligence, the firm’s HGD methodology layers Financial, Legal and ESG diligence on top of preliminary business model analysis and incorporates operational data mirroring the company’s economics in the assessment performed. The result is an in-depth analysis performed in record time to satisfy the expectations of an investor assessing a high-growth + disruptive asset in the context of a Growth round.

Mission outcome & key client impact

By using the Hybrid Growth Diligence approach, we helped assess the intrinsic value and confirm the resilience of the target’s business model by testing:

Its capacity to maintain a year-on-year double-digit growth, showing its resilience in a market that is still recovering from the Covid-19 pandemic;
The recurring nature of table payment flows, which may be an upside and pull up valuation;
Its capacity to retain on its existing clients, while taking into account the seasonal impact of some clients’ activities;
Its ability to land and expand at group level, after penetrating one restaurant unit, which can foster growth at limited cost;
The existence of a clear scalability of its model through recalculation of gross profit levels, which were challenged in light with metrics of companies with comparable value propositions.

In validating the target’s ability to grow at scale and its level of profitability, we helped our client confirm its investment thesis.

New Business Model

+ Vertical

SaaS [Applications] companies allow end users to access software applications over the internet through the payment of subscription fees. D’Ornano + Co. has historically conducted multiple SaaS [Applications] assignments for global investors.

Restaurant Tech companies develop hardware and software to help restaurants increase profitability, efficiency and customer engagement. The vertical has undergone significant expansion following the pandemic. D’Ornano + Co. has historically conducted multiple Restaurant Tech assignments across multiple business models.