Private equity portfolio maximization

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Overview

Developing a strong portfolio is a tall task. Robust due diligence, conservative purchase valuation and thorough leadership selection can put a Fund in a good position to return major value to Limited and General Partners. After these are completed, however, there is more to driving EBITDA than monitoring performance and making minor improvements. To drive the highest exit multiple possible, PE Firms need a partner who has experience rolling up their sleeves to drive monumental results for middle market portfolio companies. Daniel P. O'Reilly & Company is the ideal partner to develop insights and alternative strategies that ultimately drive value across PE investments. We understand your business and often structure our fees similarly, with our most lucrative deal coming as a result of putting the majority of our fees at risk. Contact us to learn whether we can drive value for your fund with minimal financial commitment.

CASE EXAMPLE
13-Week Project: Drove over 20% material cost savings for PE portfolio company and identified several other portfolio companies within the same fund that could benefit from consortium sourcing


Situation 

  • PE fund owned one of its largest portfolio companies for five years and high revenue growth, but decreasing EBITDA margin
  • Company had grown from multiple acquisitions that were poorly integrated
  • Portfolio company hired us to add rigor to the decentralized procurement process
  • Client was resistant to pay significant consulting fees without a promise of good EBITDA results, so we structured a deal that was ultimately 80% performance based, sharing in the gains we created

Approach

  • Conducted market research that included market size & segmentation, five forces analysis, commodity trend & implications and  54 robust potential supplier profiles across four sourcing categories
  • Ran Request for Information (RFI) to understand vendor capabilities, two rounds of Requests for Pricing (RFP) and direct negotiations with 15 category finalists that resulted in 21% savings
  • Drove implementation throughout the organization, creating procurement process that ensured the portfolio company captured the value created in the wave 1 project
  • Identified several additional operational improvement quick wins as a result of initial engagement
  • Highlighted several other portfolio companies with likely procurement spend overlap that could benefit from the pricing received during the initial procurement project and began discussions for quick wins

Impact and Results

  • Portfolio company achieved major procurement savings without having to set up a centralized procurement department, which would have diluted EBITDA leading up to potential sale
  • Based on projected 8-10x exit multiple, drove ~$40M in enterprise value excluding "soft dollar" savings from significantly reduced complexity
  • Reduced number of suppliers from 200+ to ten, making account significantly more important to all suppliers that became strategic partners
  • Reviewing opportunities to leverage the robust process at other portfolio companies within the same PE firm and the option to conduct consortium sourcing for like categories throughout the portfolio