Quality of Operations® Due Diligence Unveils $960K in EBITDA Opportunities

A private equity firm evaluating an investment in an $80M ready-to-assemble home furniture manufacturer

Focus

A private equity firm retained TriVista to assess the operational competitiveness of its target, a company that promised superior just-in-time manufacturing capabilities. The assessment included:

  • Analysis of potential production costs and savings
  • Determination of tariff impacts that would arise from moving the business to China
  • Evaluation of the target’s plan to undergo an east coast expansion
  • Root cause analysis of recent margin erosion

Approach

  • Reviewed Targets’ operational competitiveness including cost, quality, and drop shipments vs. overseas manufacturing
  • Performed operational assessment with focus on the level of manufacturing automation and “just-in-time” manufacturing capabilities
  • Reviewed logistics processes and assessed potential for efficiency and freight spend improvements
  • Conducted capacity analysis to determine expansion opportunities on the east coast
  • Assessed New Product Development (NPD) processes

Outcome

  • Identified $960K in EBITDA improvement opportunities
  • Recommended the target not pursue a relocation to China, as the savings would be offset by impending tariffs resulting in a $3.4M cost
  • Concluded that an east coast expansion was the appropriate next step to meet future growth and service level plans
  • Provided a list of potential locations for the east coast expansion after a high-level evaluation of sourcing, logistics, and distribution implications
  • Determined that margin erosion was caused primarily by a change in product sales mix, as well as increased raw material costs
  • Recommended a more formalized NPD