Challenge:
A PE-backed roll-up strategy involved acquiring multiple mid-sized manufacturing companies specializing in industrial equipment. However, siloed operations, outdated production practices, and supply chain inefficiencies led to higher costs and missed customer deadlines. Post-acquisition, the PE firm faced high working capital requirements and declining EBITDA margins.
Solution:
ASAAP was used to analyze integration roadblocks and revealed that a lack of cause-and-effect linkage in strategy formulation led to inefficiencies. Leaders had different interpretations of the operational goals, causing friction in implementation.
- Lean Six Sigma methodologies were applied to improve quality, reduce scrap, and optimize workflow.
- A Balanced Scorecard tracked operational KPIs such as on-time delivery, cost per unit, and inventory turns.
- Kaizen workshops focused on improving procurement and supplier negotiations, leading to better contract terms and reduced material waste.
- A new ERP system was implemented to integrate financials, operations, and procurement across all locations.
Outcome:
- Lead times reduced by 35%, leading to improved customer retention and new contract wins.
- Inventory turns improved by 40%, freeing up $5M in working capital.
- Cost per unit decreased by 12%, boosting EBITDA by 22% within 18 months.
- The acquisition achieved 4.5X EBITDA growth in three years, positioning the company for a lucrative exit.