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Getting under the bonnet
Deal Overview Transcript

Hi, I'm Steve Munce, and I'm really pleased to talk to you about the key role KPMG has played in supporting Ford to execute the recent Jaguar and Land Rover deal!

Why did Ford choose KPMG? Well, after working very closely in supporting Ford with the highly successful sale of Aston Martin for $950 million, we were asked to help with the separation and preparation for sale of the JLR businesses.

So, what exactly is the Jaguar Land Rover (JLR) business? The Land Rover portfolio comprises 5 distinct models, including the Range Rover and the Discovery, whilst the Jaguar portfolio comprises 4 models including the 2008 What Car 'Car of the Year', the XF.

With these high profile models, and the complexity of the global JLR business that employed some 16,000 people, with 4 key manufacturing sites, 2 key product development sites and some 2,500 dealerships in 5 continents, there was a lot involved!

How did we manage this? Firstly, confidentiality was paramount! Our joint Ford/JLR/KPMG team worked off-site to set about clarifying where the value of the business lay. We then established workstreams to define how to articulate the key value drivers for the business, covering Financials, Operations, Separation, Tax and Pensions.

For example, by supporting preparation of the business plan through these workstreams, we were able to identify and analyse the financial trends, which meant we were able to ensure that management were well positioned to explain to potential buyers, trend changes identified between the historic records and the forward projections. In other areas, we helped by extracting evidence to support forecast savings from materials procurement and improved manufacturing and engineering efficiency. 

We also challenged the way management were thinking, by leading them through a process that required them to focus on their business in a way that they had never thought about before. We did this through using a set of separation principles, developed by the Steering Group, to provide direction for all subsequent activity. Some of these included how to deal with shared staff, the approach to pricing, and the transitional and long term support agreements required to maintain the operational integrity of the Ford and JLR businesses, post deal completion.

Working together with Ford and JLR, Service Delivery Models (SDMs) were prepared for each business function, to describe them at 3 different points in time - 'as is', deal close and as a separated entity and in terms of people, process, technology, contracts and assets.

By using this insightful approach, it forced management to think and understand how the businesses will work together through the deal process and beyond. This work resulted in the development of a 'Separation Pack' deliverable that sets out for a buyer and its Due Diligence team how the businesses will operate in the future, with resulting separation cost adjustments overlays in the business plan.

The plans for implementing the separation were supported by both the vendor and the target businesses. These helped a range of bidders to take an informed in-depth look at the JLR business.

So how did we help Ford to achieve a price at the top end of the analyst's estimates…?  As well as the components I've outlined in terms of technical delivery, one of our key strengths is the experience and challenge provided by the KPMG team. This enabled management to understand and address issues, and therefore helped fuel competitive tension and protect the price received for the business.

We're really proud to have supported Ford through this complex sales process and to have helped them through an auction process to get the best possible price for the JLR business.

As one Ford executive said to me 'We just wouldn't have got it done without you guys'.

Steve Munce
March 2008

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