Corporate finance

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Overview

Organizational resources are finite; thorough prioritization and efficient utilization of these resources can drive a long-term competitive advantage. Perhaps your enterprise is considering the advantages of warehousing vs. “just in time” inventory, leasing vs. buying major equipment, or simply trying to increase working capital? DPO&Co has years of Corporate Finance experience that can help clients add rigor to capital assessments and decisions, plan for risks and an uncertain future, or identify the KPIs that will ultimately drive the most value for your company.

CASE EXAMPLES

8-Week Project: Collaborated with Finance and Operations at PE owned client to develop tools to prioritize capital requests, improve working capital and standardize revenue forecasts  
 

Situation 

  • Customers negotiated long payment terms and client was growing at 30% per year, which was putting pressure on client to meet employee, debt and supplier obligations 
  • Client had several capital requests from various business units and was seeking low-cost debt to finance purchases of equipment, but senior covenants constrained traditional financing 
  • To reduce working capital burden, company was employing “just in time inventory” practices, which were optimal for some materials, but did not take advantage of bulk ordering potential 
  • Several valuable assets were sitting idle in some parts of the client footprint while business units were renting equipment in other parts of the country 
  • Company was focused on top-line and share growth but did not have granular view into profitability

Approach 

  • Analyzed equipment utilization and location, project pipeline, asset rental and liquidation values, transportation and disposal costs to develop fact base 
  • Structured approach to review capital with a “Total Cost of Ownership” lens, which included cost of capital, true maintenance, disposal fees, perceived risk and more 
  • Built a robust model that evaluated and prioritized all capital requests by the greatest reward for any given level of risk 
  • Prioritized materials that could be good candidates for potential warehousing and consignment vending and quantified potential material cost impact 
  • Reviewed contracts and conducted “post-negotiation, negotiations” with suppliers to reach an optimal outcome of vendor discounts for early payment and invoice premiums for extended payment terms 
  • Used ERP system to highlight "to-be" state of granular profitability reporting and aligned with management that Economic Value Added (EVA) was the one definition of success

Impact and Results 

  • All 50 major capital requests were prioritized by total value at stake, which allowed the CFO to adjust bank financing amounts according to the most critical needs
  • Clear list of equipment that could either be re-rented or liquidated to meet higher priority demands 
  • Supplier relationships became more collaborative as vendors could accept discounts at times when cash flow was low and client could request extended terms as needed 
  • Procurement organization was better equipped to reduce inventory shortfalls at significantly lower cost, without material spoilage  
  • C-Suite had clear strategic direction and KPI to track and maximize, drive manager compensation, etc.