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Success Story: Exceeding Exit Value Expectations (CS189a)


189a

 

Optimizing the supply chain to fuel growth for a leading specialty chemicals company.

 

This story is for executives who:

  • Transform their procurement and logistics functions across multiple acquisitions to help fuel growth
  • Increase exit value and enable rapid divestiture
  • Extract more value from suppliers


The Challenge

This private equity owned, full service specialty chemicals manufacturer and distributor, develops, manufactures and supports a broad range of customized solutions to meet customers’ performance, quality, cost, safety and compliance needs in a variety of industries globally.

The company had achieved rapid growth (195% revenue growth) through nine strategic acquisitions and planned to continue to experience significant growth. However, the supply chain processes remained heavily siloed and inefficient with no visibility into spend. In addition, the company was at the end of its investment lifecycle with its PE owner, and was likely going to be put up for sale in the near future. The PE sponsor asked Maine Pointe to support the sales process by working with potential acquirers to better understand the value creation potential of a procurement and logistics engagement that would ultimately drive out inefficiencies and enable them to better integrate future acquisitions.

 

Professionalizing procurement and logistics

Maine Pointe’s analysis of procurement and logistics capabilities across the nine companies revealed that management had little visibility of their own fleet and third party logistics activity. Procurement was fragmented and highly tactical in nature. Senior managers were focused on ongoing acquisitive growth, but were not seeing the opportunity to optimize by leveraging spend, consolidating their supply base, and applying a more strategic approach to rapidly drive significant annualized savings. From a maturity perspective, our industry and subject matter experts assessed procurement as level 1.3 and logistics as level 1.1 on the 5-level TVO Pyramid™. Maine Pointe worked closely with senior executives to professionalize procurement and supply chain areas and improve process efficiency by:

  • Implementing a supply chain organization re-design while formalizing roles and responsibilities and developing competencies
  • Executing a formal strategic sourcing activity while standardizing the process across the enterprise resulting in moving maturity up to a level 3
  • Raising logistics function maturity to level 2, optimizing external spend and reassessing cost/benefit and efficiency of own fleet
  • Providing transparency into data to enable them to use it for active management
  • Conducting a “focus and alignment” (F&A) process that aligned the organization for supply chain transformation

By transforming procurement and logistics and optimizing the growth that had already occurred, the company has become more effective in its acquisitions. This led to a higher-than-expected selling price and a rapid transfer of ownership. The new owners were so impressed with the accelerated results Maine Pointe delivered that they have now engaged us to help them increase the exit value of another of their portfolio companies.

The Results

By transforming procurement and logistics, the company has become more effective in absorbing acquisitions, resulting in:

  • Exceeded PE owner’s expectations for exit value and helped facilitate a rapid sale of the business
  • Centralized procurement and logistics organizations
  • 16% EBITDA improvement
  • 34% cost reduction - 3rd party transportation spend
  • 18% cost reduction - private fleet operations
  • 9% cost reduction - direct and indirect materials
  • 5:1 ROI


Lessons learned for other executives

  • Organizational transformation is a critical link to sustainability of savings values
  • Acquisitions must be fully integrated to leverage the economies of scale inclusive of private fleets
  • Utilization of compliance reporting is essential to active management
  • Maintaining a cadence for supplier relationship management via quarterly business reviews leads to savings realization and opens the door for continuous improvement

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