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Case I
A PE acquired this founder-owned manufacturer which had two business lines (a) 80% of revenues from a 30% GM B2C business; (b) 20% from a 55% GM industrial business, kept the management team in place, and kept executing on the original thesis. After 3 years, EBITDA had cycled back to par. I was brought in with the goal to double EBITDA so the fund could get their money back. I analyzed that the smallest product line had the greatest potential, and this pivoted manufacturing and sales, brought in a new leadership team, and in 26 months, increased EBITDA 7x on a 1.5x revenue increase, resulting in a 5.2X MOIC (net).
Results: In 28 months, built and sold company for 8.2x EBITDA (vs industry comps of 5.2x). 5x MOIC
Revenue up 50%
EBITDA up 700% (from 5% to 27%)
GM up 300 bps (from 36% to 39%)
Paid down all debt
$7M of expansion Capex
WC reduced 500 bps (15% to 10%)
With only $0.5M SG&A increase
Plus building a long-lasting company thru culture, diversification; stronger brand
CEO
Private Equity owned manufacturer of plastic components for energy infrastructure
In 28 months, built and sold company for 8.2x EBITDA (vs industry comps of 5.2x). 5x MOIC
Revenue up 50%
EBITDA up 700% (from 5% to 27%)
GM up 300 bps (from 36% to 39%)
Paid down all debt
$7M of expansion Capex
WC reduced 500 bps (15% to 10%)
With only $0.5M SG&A increase
Plus building a long-lasting company thru culture, diversification; stronger brand
CEO
Private Equity owned leader of gearing solutions for steel, mining, and oil and gas
Led turnaround after accounting issues were uncovered where EBITDA was over stated
EBITDA now at $2M / yr and growing
Increased pricing 2% to 4% in some product lines, reduced others for a net gain in profitability
Reduced factory workforce by 40% and implemented cross-training to increase labor efficiency
Reduced management staff by 30% resulting in quicker decision and increased role clarity
Killed new product programs that had >4 year ROI
Disciplined management of variable cost; Every key player has monthly targets and is measured by it.
Rooftop consolidation from 3 to 2
Cash:
Reduced AR from $5M in 90+ days to avg of $100K
DSO reduced by 5 days
Generated 13-week cash flows
Reduced inventory
Extended payment terms to Net 60
Operations:
Improved On-Time Delivery from 40% to 93% by implementing new scheduling system
Orders:
Reduced 40% while market fell 70%. Achieved through more effective sales team, adding services business, and diversifying
Increased sales efficiency by implementing Salesforce.com CRM
Upgraded sales team from all independent agents to mix of upgraded Reps and some direct
Launched a comprehensive marketing including new branding, lead generation, new websites, email campaigns
Revitalizing an aged brand - electric motors
Results after 18 months:
Increased gross margin 250 basis points through value engineering, low-cost country sourcing, and price increases
Grew top-line 20% in North America, Europe, and China despite market being flat by implementing disciplined sales process (including salesforce.com) and new product development
Reduced working capital 2% by reconfiguring sourcing operations
How:
Performed business review:
Five forces: Competitors not focused on this space; Industry rivalry low, buyer power medium, supplier power low, threat of new entrants low
Overall market growth in low single digits; however, tighter regulatory requirements (emissions controls) forced manufacturers into replacement cycles
Identified a $10M European market; Technical requirements very similar
Found that Chinese customers emerging to threaten the long-established EU and NA ones with significant investments in manufacturing infrastructure and working on figuring out channel.This change was an opportunity.
2. Actions:
First 12 months: Increased base business by targeting high volume OEMs to spread overhead
Then diversified to high margin niche markets; Placed salespeople in Europe and China; Implemented variable comp with margin targets
Manufacturing: Developed comparative cost baseline for each factory; Launched two large lean work-outs
Cost reduction: Several value-engineering projects
Diversified into higher margin niche markets and built the brand into number two position globally
Championed breakthrough strategy which increased the division’s profitability by more than 300% over a three-year period by expanding outside the core
25% engineering throughput increase by implementing Phase Gate Design for Six Sigma (DFSS) discipline. Transformed fragmented, underperforming regional teams into an energetic global group while turning over 30% of the staff
New Product / Market launch
Turned around declining market share from 8% to 30% in 18 months by refocusing an over budget and behind schedule product development
Revitalized sales into international markets: Taiwan, China, Japan, and South Korea, Germany
Awarded Company’s highest merit-based salary increase in first 12 months
Led Voice of Customer project to develop a new line of electronics test equipment with unprecedented ease of use; Now the company's primary growth platform
Key customers included Intel, Sharp, Toshiba, TI, IBM, Philips, Siemens, Hyundai, LG
Set up a new Division of a Fortune 50
Drove 200% improvement in customer inquiry response using Six Sigma
Developed new $50M+ market space in strategic partnership with government
Increased customer loyalty score to be 500% higher than peer business units through strategic multi-level account management
Led cross-business efforts to develop multi-generation product roadmaps
Responsible for strategic marketing, pricing, forecasting, recruitment and training, new product development, mergers and acquisitions, and alliances; Established structured customer intelligence
WiFi Router Manufacturer (privately held):
Achieved 70% growth in two years from 12 new products; Drove 20% profit increase in legacy products
Reduced product development cycle-time 30% through better project management
Developed engineering team into a customer-focused product development team
Drove 5x increase in leads through internet keyword advertising and re-branding
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