Background
A consumer-focused private equity firm engaged us to conduct due diligence on the procurement process of a potential acquisition target. The objective was to evaluate the procurement side of the company, scrutinize the supply chain data, and identify areas for improvement.
Actions
Over 2.5 weeks, our team, consisting of two senior practitioners and an analyst, delivered comprehensive results through the following steps:
- Data Audit: We performed a thorough analysis of the data room contents, including contracts, one-year historical data, five-year future projections, and budgeted P&L. Access to the financial model allowed us to ensure a complete understanding of the presented data, uncovering inconsistencies and enhancing the projected outcomes for the overall period.
- Interviews: By interviewing the leadership team, we gathered crucial insights beyond financial data, such as detailed supply chain information and historical context. This alignment ensured that all parties—our firm, the client, and the audited company—were on the same page for optimal outcomes.
- Contract Review: We meticulously reviewed contracts to identify areas for improvement. This process revealed opportunities in payment terms and price review mechanisms that could result in substantial savings.
- Market Consultation: Leveraging our network and conducting a live soft market consultation, we obtained pricing for key ingredients. This provided an estimated view of potential improvements and their impact on EBITDA.
- Analysis and Testing: Utilizing the gathered information, we updated the client’s financial model to illustrate savings potentials across different scenarios. This enabled the client to understand the financial implications of their potential acquisition
Outcome
Our comprehensive approach identified significant savings opportunities and potential contract enhancements, leading to improved EBITDA over the next five years. Specifically, we estimated savings potential ranging from 3-5% on turkey to 10-15% on salmon and beef, with an overall savings range of 5-7.5%. These insights empowered our client to make a well-informed offer, ensuring the deal was based not only on current data but also on future potential.
