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Finding profit potential in a struggling private equity portfolio company

The IndustrialsCo*, acquire by VentureCo* 2 years back, wanted to improve profit potential. We took a “full potential” approach to profit improvement, and helped the company successfully implement a full suite of transformational value creation programs, among which we supported end-to-end execution of restructuring and turnaround projects across the company’s regional sales and production subsidiaries. Our transformational value creation actions identified ~60 mUSD in long-term profit.

At a Glance –

60 mUSD

in long-term EBITDAR potential

The Full Story - 

• Situation:

◦ Following years of stagnating growth and small acquisitions, the IndustrialsCo is more like a conglomerate of independent entities operating on their own, rather than an integrated market player. The company needs to consolidate its sales/ operations/ supporting functions footprint, while harmonizing its processes in order to improve its profit potential.

◦ The IndustrialsCo has had a track record of not being able to get costs under control and the data seem not able to provide full transparency. Besides, it is often that cost savings projects get cost or time overrun, which lead to them abandoned in the middle of execution, worsening further IndustrialsCo’s financial performance.

• Approach:

◦ We took a “full potential” approach to profit improvement, assessing opportunity across four major categories including growth potential, operational potential, organizational potential and financial potential. Most importantly, we implemented a system in order to record all initiatives, track implementation status of all initiatives, transparentize ownership of initiatives and financial impact of initiatives, and we report status on a monthly basis through an aligned governance model.

◦ We executed restructuring and turnaround projects on a global level consolidating and rationalizing sales and production footprints. We aligned our projects with the overall IndustrialsCo strategy and for each project, we conducted business case review and got VentureCo approval before we started tactical implementation.

◦ We made an add-on acquisition targeting the most profitable business unit of IndustrialsCo, through which IndustrialsCo would be able to offer a complete product portfolio to its customers within the perimeter of the business unit.

• Results:

The plan for profit improvement of this portfolio company has beaten financial expectations in the short and mid run and identified almost ~60 mUSD in long-term EBITDAR potential.

* We take our clients’ confidentiality seriously. While we've changed their names, the results are real.

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