A telecom equipment manufacturer discovered that some of its offerings were priced up to 60% less than one of its primary competitors, contrary to a common misconception that the client was at a significant price disadvantage.
As part of its due diligence, a telecom equipment manufacturer needed to understand the pricing differences between its own product and support offerings and those of a competitor being evaluated as an acquisition target. A major complicating factor was that neither company was allowed access to the other's detailed financial and pricing information, due to corporate privacy rules. Deeply understanding pricing was a critical input to the acquisition business case and for establishing pricing for the proposed combined company.
Waterstone compared the Total Cost of Ownership (TCO) of the client's offerings to the target's offerings, making strategic pricing recommendations for post-acquisition actions. The situation called for a pricing model and a normalization methodology to rapidly draw insights while mitigating complexity of the business:
- 20 different hardware and software configurations
- 2 product support annuity terms with various discount ranges
- 3 pricing levels: list, wholesale, and street
- 2 delivery mechanisms: manufacturer or channel-delivered
The acquisition closed. The TCO comparison provided the baseline for the pricing and offering strategy for the combined entity. Throughout the effort, Waterstone served as the "middle man"between the client and the target, deploying a model and process to analyze pricing without violating corporate privacy regulations.
Enterprise telecommunications system manufacturer
Detailed pricing comparison was a critical requirement to pre-acquisition due diligence
Customer profitability & pricing analysis
Strategic & operational due diligence
Acquisition closed. New entity's pricing and offering strategy shaped by due diligence findings.