Private Equity Firm Identifies $7.9m in Ebitda Potential for Target Acquisition Through Operational Due Diligence

A capital investment and advisory firm offering capital solutions, mergers and acquisitions advising, strategic advising, and financial consulting, to founders, families, and management teams. 

$7.9M
Annual EBITDA increase identified
109%
Potential increase in revenue

Challenge

Our PE client was actively exploring the possibility of acquiring a Houston-based Asian food manufacturer. To support this acquisition, our team was brought in to conduct a comprehensive operational due diligence. Our objective was to provide a detailed assessment of the business, calling out organizational risks and defining potential enhancements to the business that would lead to an overall increase in investment value.

Discovery

  • Interviews with key personnel and site visits were conducted to identify opportunities and operational risks within the business.
  • Financial statements were analyzed in addition to historical data to find gaps and areas for improvement specifically within logistics and operational costs.
  • Time and motion studies were conducted to find bottlenecks and efficiency gaps within manufacturing processes.
  • Equipment was researched to support cost-benefit analyses for upgrading to increase throughput.

Value Created

As result of this initiative, our client gained strategic operational visibility to opportunities within the target acquisition that would lead to:

  • $6.6M Annual EBITDA Increase – Scenarios for revenue growth, with and without facility expansion. These included implementing enhanced automation and processes to boost production capacity.
  • $1.2M in Operational Efficiencies – Based on observed inefficiencies at the facility within logistics planning, vendor negotiation, and employee attrition. Opportunities were identified that would not decrease capacity.
  • Mitigation of Operational Risks – Costed mitigation plans were provided for core team members and food safety risks (observed on-site) that posed significant cost implications for the business, if unaddressed.

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