Success Stories / Operational Due Diligence Uncovers Risks and Opportunities to Double EBITDA

Operational Due Diligence Uncovers Risks and Opportunities to Double EBITDA

$200mn Manufacturer and Distributor

2024

BACKGROUND

A private equity firm sought an expert’s assessment of a target company’s operations. Specifically, the PE firm wanted to:

Identify — and quantify — risks and value-creation opportunities
Evaluate target’s C-suite executives and key functional leaders
Evaluate measurement systems and KPI reporting
Evaluate quality and food safety systems
Assess adequacy of the existing facility and quantify growth capacity

SERVICES

Transaction Support

ASSESSMENT

Saphineia spent 3 days on-site, which included time on the shop-floor and conducting employee interviews. In addition, Saphineia performed detailed analysis of the target’s financial and operational data.

Based on this work, Saphineia found the target’s corporate culture, hourly labor force, supply chain and quality departments to be excellent.

RESULTS

Opportunities. We identified quick wins and longer term opportunities that could double EBITDA over 24 months. Opportunities included reducing scrap, improving labor productivity, reducing planned and unplanned downtime, addressing loss-making SKUs and unlocking capacity for resale.

Risks. We also identified significant risks related to a planned expansion project. Additionally, we noted a substantial need to upgrade the commercial organization and increase pricing discipline.

CLIENT BENEFITS

Confirmed the absence of red flags
Identified risks that were addressed prior to closing, including preventing a risky satellite facility expansion project from moving forward
Identified opportunities to double EBITDA (PE firm retained Saphineia post-close to help it capture several opportunities identified during the operational due diligence assessment)