Download as PDF, PPTX
Pro Action Case Studies Diligence Through Exit
- 1. Due Diligence toExit Finding and Mining Value Hidden in Operations September, 2012 The Competition is Fierce. Change the Rules.™
- 2. Company Overview • The ProAction Group serves private equity firms who invest in middle-market consumer products, manufacturing, distribution, healthcare and business services companies. • Our clients recognize the need to improve EBITDA, Working Capital, Competitive Positioning and Organizational Effectiveness by adding an increased focus on operational excellence. • We act as a resource extension to owners and management teams. We provide operational expertise, resources, and tools to help maximize performance. • What makes us distinctive is that we get measurable and sustainable results. We identify and quantify opportunities, then turn them into reality. We have a relentless drive to help our clients build winning companies. Core Capabilities: • Lean enterprise / Lean manufacturing • Outsourcing / asset rationalization Manufacturing Operations • Quality systems and process • Inventory and materials management • Value Engineering • Strategy development • Supplier development Supply Chain Operations • Asia / global • Logistics (freight, warehousing and planning) • Pricing strategies, processes and disciplines • Customer and product profitability Sales Operations • Channel strategies and management • Sales & operations planning (S&OP) • Product development process 2 www.proactiongroup.com
- 3. ProAction’s Role ineach stage • Identify and Quantify Opportunities to Increase EBITDA, Stage 1 Improve Competitive Position and Reduce Working Capital. Due • Identify and Quantify hidden risks and opportunities in the Pre- Diligence operations and management processes. Close • Validate the investment thesis, from an operational perspective. Preparation • Participate in Strategic Planning Process. Stage 2 of 100 Day • Facilitate management process to develop manufacturing, At Close Strategy distribution, quality and sourcing strategies / project plans. • Lead the management team through stabilizing the business Stage 3 operations (as needed) and through realizing the future Implementation state. First of Strategy • Implement specific projects and processes requested by Year Post management / ownership. Close • Help the company institutionalize the habit of improving. Stage 4 • Transition to a coaching / monitoring role. Through Ensuring Sustainability • Support specific initiatives as appropriate. Exit • Help prepare the company for financial events. 3 www.proactiongroup.com
- 4. Due Diligence: ProAction’sRole An effective Due Diligence Process addresses company strategy, human resources and organizational development, leadership, IT, and core operating functions. ProAction’s Role in the Due Diligence Process: • Assess the Company’s overall “Operational Effectiveness” and management’s ability to execute on its strategic plan (Scalability / Depth of Infrastructure / Quality of Systems). • Identify and Quantify Opportunities to Increase EBITDA and Reduce Working Capital. • Identify and Quantify hidden risks and opportunities in the operations and management processes. • Assess, Document and Quantify opportunities for the Private Equity firm and its Financing Partners (Validate the investment thesis, from an operational perspective). 4 www.proactiongroup.com
- 5. Due Diligence: Areas/ Hypotheses We Test and Quantify Increase EBITDA Improve Balance Sheet / Cash Flow • Throughput • Shrink the Order to Cash Cycle • Improve Processes • Improve Inventory Management • Fixed & Variable Expenses • Increase / Speed Collections • Product Pricing • Minimize Unnecessary Capex • Asset Utilization • Risk Reduction Enhance Competitive Position Address Gaps in Investment Thesis • Scalability • “Enterprise Risk” • Lead times – Including IT – Operational Disaster Recovery • Flexibility • Skills Assessment of Organization • Time to market • Organizational Development Needs • Quality • Cost structure 5 www.proactiongroup.com
- 6. Post Acquisition: Execution Transform Management Goals Identify Opportunities into Actionable Initiatives Management Doesn’t See • Detailed project plans focused on • Best ideas from multiple industries tangible results and experiences • Quantification of costs and benefits • Assessment model and other analytical tools • Third party perspective Drive Execution through Accelerate Resource Extension Results • Experienced people • Project leadership experts • Proven methodologies, tools, and • Dedicated resources working with templates management Transfer Capabilities, Knowledge and Tools • Sustainability of gains • Education & Training • Metrics 6 www.proactiongroup.com
- 7.
- 8. Case Study: PackagingCompany Acquisition • Identified ~$1 million in EBITDA improvements. Due • Documented the savings, communicated with investment Pre- Diligence committee and financing partners. Close • Information helped the PE firm better assess investment opportunity and develop a strategic plan. Preparation • Participated in Strategic Planning Process. At of 100 Day • Facilitated management process to develop manufacturing Close Strategy and sourcing strategies / project plans. • Led management and personnel through lean implementation and global sourcing efforts. Implementation Year 1 of Strategy • Realized nearly $2 million in annual EBITDA gains. • Increased customer service levels. • Operating Capacity increased by over 20%. • Company is now leading the efforts on their own. Year 1 Ensuring Sustainability • Pursuing ~$1 million of saving from additional lean and &2 global sourcing projects. 8 www.proactiongroup.com
- 9. Case Study: DistributionCompany Acquisition • Identified ~$2.7 million in EBITDA and $6.5 million in working capital improvements. Pre- Due • Identified opportunities to increase order fulfillment levels from mid Diligence Close 80’s to over 95%. • Documented opportunities to consolidate facilities and reduce square feet utilized by over 250,000 sq ft. • Led the management team through prioritizing improvements to At Preparation realize the future state. of 100 Day Close Strategy • Developed a full 6 month implementation plan and timeline with management. • Led management and personnel through inventory planning, lean implementation and sales and operations planning (S&OP) efforts. Months Implementation • Within 6 Months: 1-6 of Strategy • Realized over $3 million in annual EBITDA gains. • Increased customer service levels to over 97%. • Inventory turns increased from 3.8 to 4.3. Months Ensuring • Company is now leading the efforts on their own. 7 - 12 Sustainability • EBITDA gains will surpass $5.3 million annually. 9 www.proactiongroup.com
- 10. Case Study: HeavyEquipment Manufacturer Acquisition • Identified the means for the company to increase EBITDA margins from 32% to 36%. Specifically, we identified the opportunity to: Pre- • Consolidate facilities through lean manufacturing processes. Due • Reduce product cost and increase manufacturability and quality Close Diligence through value added engineering processes. • Reduce scrap, back orders, expediting costs and lost sales during new product roll outs (PPAP processes). At Preparation • Led the management team through prioritizing improvements to of 100 Day Close Strategy realize the future state. • Implemented Lean and Quality improvements that led to: • 14% reduction in labor costs. Year 1 Implementation • 25% reduction in floor space utilized. &2 of Strategy • An increase in EBITDA from 32% to 36%. • Dramatic reductions in delays, scrap and rework costs linked to new product roll outs. Year 2 Ensuring • One on one coaching and mentoring for plant managers led to &3 Sustainability continuing improvements after our project completed. • Company is now leading the efforts on their own. 10 www.proactiongroup.com
- 11. Tim Van Mieghem The ProAction Group (312) 371-8323 tvm@proactiongroup.com Realizing Value Hidden in Operations