Quality of Operations™ and IT Assessments Find 8% EBITDA Improvement and 5% Working Capital Improvement

A manufacturer of machinery and equipment.

The Challenge

A private equity firm was looking to acquire a leading manufacturer and importer of machinery and equipment. They brought in TriVista to conduct both an operations and IT due diligence to help identify operational and IT levers that would continue to expand EBITDA and/or reduce current operational risks along with an associated value creation plan.

Our Approach

To prepare, we first developed a baseline understanding of the deal hypothesis and business operations. From there, we conducted functional assessments via site visits, detailed interviews with key staff members, and in-depth data analysis. This included conducting a savings assessment for EBITDA and costs.

The Results

We used the above approach to validate current organizational performance, flag any risks/concerns with the acquisition, and identify best practices to implement in the future state. This included:

• Opportunity for an 8% EBITDA increase through division integration, machine shop-floor lean improvements, closing a facility, centralizing sourcing and procurement activities, and more
• Opportunity for a 5% increase in working capital through removing excess inventory, and changes in accounts payable
• Formal continuous improvement program, standard operating procedures, and visual management
• Asset utilization improvement through implementation of an advanced planning software
• Centralized purchasing at the corporate level to leverage commodity price reductions and volume incentive rebates
• Identification of the ideal future state carrier through a review of freight contracts
• Rationalization of duplicative corporate positions across the network with a traditional org structure
• Implementation of a WMS system with established warehouse metrics and improved assembly flow
• Increased inventory turns by the purchase of material based on improved market intelligence
• Implementation of an IT application roadmap strategy including a recommendation of appropriate systems and implementation timelines to best assist their business and consolidation opportunity

The report gave the client confidence to move forward with the acquisition with a full value-creation roadmap across integration, operations, and IT activities with target savings to underwrite into the deal.