Operations Due Diligence Unveils $960K in EBITDA Opportunities

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

The Challenge

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

Our 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

The Results

• 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