Case Studies
Read more about our case studies here.
01
Growth Strategies for Divestitures
Often divestitures or carveouts occur when the growth in profits/excess cashflow of the business slows or plateaus (or an exit is required for timing reasons) and the owner is reluctant to commit to either the capital, timeframe or risk tolerance required to achieve the next wave of growth. Being able to demonstrate that there are credible, achievable, growth paths (with understandable reasoning why you have not yet pursued them) can help galvanize the organization and contribute to achieving a higher exit valuation. The key element is usually not the creation of the strategy; it is creating the strategy in a way that the management of the portfolio company/carve-out adopts it as their own aspirations which they will independently advocate to buyers.
In a case example, a large US-based PE fund had owned a non-US parts manufacturer in the automotive industries for several years and had successfully completed both their performance improvement program and their regional rollup strategy. While the financial results during their ownership had been extremely strong, the portfolio company had no “natural” growth remaining for its current owner and strategy.
Working entirely with fund and portfolio company resources to maximize buy-in, retained knowledge and minimize external costs, we were able to identify and develop three potential grow aspirations and pathways, each one of which would have particular appeal and applicability to a particular “grouping” of our expected potential buyers (Regional strategics, Global strategics and Global PE.) Most importantly, the senior management team believed in these aspirations, although their were individual preferences about the “best” (which actually seemed to increase the credibility of these various strategies.)
The sale eventually closed at a multiple 1.5x higher than initially projected after a very competitive auction process.
02
The First 100 Days - On Substance
When a new executive takes over, it is critical to swiftly develop an agenda for quick wins and longer-term change levers, based on an understanding of the current strategy, and its shortcomings.
Issues and risks as well as hidden champions need to be identified at an early stage to avoid strategic and cultural traps. Opportunities should be surfaced quickly to make first impressions to direct reports and other stakeholders.
While cultural fit and other soft concerns are important as executives onboard, the key element is to accelerate the development of a deep understanding of the substantive challenge and a roadmap of what needs to be done, in a 3-horizon logic.
In a case example, we joined the client on his first day as the new CEO of a professional services company that had significantly underperformed as a portfolio investment of a media company. We acted as an extension of the CEO, fanning out to different locations. interviewing senior and selected middle management, as well as customers and outside experts, to develop a view of what was working well and what needed improvement for the going concern. The CEO had asked us, in particular, to dig deep on sales, the sales incentive system, delivery teams, as well as short-term cost improvements opportunities.
Weekly, the CEO circled us around to digest the learnings of the week and adjust his priorities; we also evaluated alternative operational KPI metrics. In parallel, we explored longer-term issues and helped the CEO in developing a view of the bench strength of his extended team.
The CEO was very experienced in dealing with both strategic and financial investors and did not require much support with his upward stakeholder management.
The final product after three months of this intense joint substantive onboarding was a near-term operational improvement plan; a roadmap of growth initiatives and strategic projects, prioritized and slotted into three horizons; a target management team set-up; and a new financial and operational reporting suite which was beginning to be coded into the systems as we were rolling off.
The company achieved its end-of-second-year EBITDA run rate objective after 12 months.