PE-backed portco accelerates value capture by prioritizing the right improvements to set the stage for aggressive value creation. Diagnostic identifies $90 million in EBITDA achievable with supporting go-forward implementation plan.

When exit dates are looming on the horizon, PE firms seek to aggressively create and capture value before the sale. While there is a sense of urgency to make the final push, operating partners must be realistic about what can feasibly be accomplished in the remaining months.

Challenge: Aggressively capture value and stay on track for a 12–15-month exit. The operating partners knew that if they could quickly identify and act on the right value creation opportunities, they could significantly affect multiples in short order.

We recently helped a PE firm that was looking to sell a portfolio company within 12 months to view its value creation opportunities based on the number of months it would take to complete. The operating partners wanted to identify and address the highest value, most feasible improvement projects.

Solution: Conduct diagnostic, identify & quantify improvement priorities, develop & implement go-forward plan, identify full potential for production, product design, and distribution. Optimize layout and processes to achieve full potential regarding to cost to serve.

The work began with a five-week diagnostic assessment in the each of the portfolio company’s five locations.

We analyzed each category across savings levers. We then identified full potential and created a bottom-up view to focus on immediate benefits. Our analysis started with actual performance and identified initiatives that would close the gap to full potential. We then identified and eliminated non-controllable factors that would make it impossible to achieve a “theoretical” full potential.

We divided the projects across the four manufacturing sites and grouped them into three key categories:

  1. Value Add / Value Engineering
  2. Operational Improvement
  3. Back-Office Administrative Processes

The key actions required included kaizen events and targeted projects that focused on:

  • Line balancing and cell design
  • Set-up reduction
  • New product development processes
  • Management system enhancement and/or implementation using MDI (Managing for Daily Improvement) in all sites.
  • Value add/ value engineering at all sites
  • Layout and workflow improvements
  • Developing sales processes, standard work and systems

Results: $13 million / 500 basis points of improvement in EBITDA worth $90 million in value creation-achievable in 12-15 months

We presented an EBITDA bridge focused only on savings achievable within 12-15 months. This included an analysis showing the return and feasibility of each potential project.

  • $13 million / 500 basis points of improvement in EBITDA worth $90 million in value creation
  • 130 areas of savings across four sites
  • Value added / value engineering projects worth $7 million
  • 61 operational improvement worth $5.8 million

The final step was to put the improvement projects into action. The PE firm knew it would need help to tackle everything on the list, including some of the highest-impact opportunities. Keys to success have included working at the point of impact to address the low-hanging fruit as quickly and efficiently as possible while outsourcing projects that require more skill and resources.

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