WHEN A PE FIRM MUST TRANSFORM A NEW PORTCO TO DRIVE FRESH GROWTH AND REVIVE AILING MARGINS

Overview

  • A private-equity (PE) firm was considering acquiring and taking private a publicly owned financial technology business.

  • The target had grown through aggressive M&A but hadn’t effectively integrated its acquired companies’ systems and assets, leading to operational inefficiencies that had begun eroding margins.

  • The investors saw an opportunity to unlock new value from the target by launching a whole-company transformation program and asked AlixPartners to help, starting with an operational due diligence assessment progressing through preclose planning and monitoring and supporting implementation of the value creation plan.

In just eight months, AlixPartners helped the PE firm put initiatives in place that fully captured $110 million in estimated cost savings from new operational efficiencies that the transformation program delivered.

THE SITUATION: A COMPELLING OPPORTUNITY TO UNLOCK NEW VALUE FROM A STRUGGLING TARGET

A private equity (PE) firm identified an opportunity to unlock new value from a publicly owned financial technology business by buying the company in a take-private transaction and launching a whole-company transformation. The target had grown aggressively through a series of acquisitions but hadn’t effectively integrated its acquired companies’ back-end systems, workforces, and technology platforms.

The investors asked AlixPartners to conduct an operational due diligence assessment prior to the transaction to confirm the hypotheses and support underwriting.

That initial assignment led to a yearlong partnership to support the transformation. In just eight months, AlixPartners helped the PE firm put in place initiatives to capture ~$110 million in estimated cost savings, or about 18% of the company’s cost baseline. This created ~$1.1B to $1.7B in valuation to the company.

THE APPROACH: COMPREHENSIVE, END-TO-END SUPPORT PAIRED WITH CLOSE COLLABORATION

AlixPartners partnered with the PE firm and key members of the management team through key stages of the target’s acquisition and transformation.

A few highlights:

Operational due diligence: Evaluating the target’s operations  


We applied our best in class, operational due diligence methodology to assess effectiveness and efficiency across the target’s operations. In a compressed timeframe and with limited access to data and management, we validated the investment thesis establishing a potential range of opportunity between $90m and $110m in margin improvement opportunity.

Pre-Close planning: Defining a whole-company transformation program

Drawing on findings from the operational due diligence assessments, we used our QuickStrike® methodology to quantify, define, and plan initiatives to capture savings within 100 days of the close.

Planning examples included:

  • Developed work-stream-specific initiatives and road maps—all aimed at accelerating time to value capture
  • Aligned management on the range of opportunity creating a pipeline of initiatives to transform the portco
  • Created and led the transformation management office to ensure proper governance of the change program
  • Drove accountability for reductions through periodic budget variance analysis

THE SOLUTION: A SCALABLE NEW OPERATING MODEL

Creating value at the portfolio company: putting in place sustainable value creation initiatives

After the close of the transaction, we partnered with the investors and portco management team to activate and implement the transformation initiatives laid out in the value creation plan.

These initiatives included:

  • Implementing an optimized organizational structure, establishing a business-line focused operating model to improve revenue oversight and reduce costs
  • Supporting the management team in organizational stabilization and establishing offshore centers of excellence for the accounting, engineering, and IT functions
  • Lowering 3rd party spend by consolidating and conducting direct negotiations with suppliers

End result: the proposed initiatives are expected to deliver an estimated net annual savings of $110 million

We reduced the cost structure of the portfolio company by ~18% of the company’s addressable baseline. Based on high level valuation ranges, this created ~$1.1B to $1.7B in valuation improvement of the holding with limited advisory investment

building

WHEN IT REALLY MATTERS: A SCALABLE NEW OPERATING MODEL

AlixPartners’ ability to deliver collaborative, end-to-end support for the PE firm as they take control of a new asset and support the investment thesis for the first year of the hold period.

The model boasted several distinctive strengths. For instance, it:

  • Accelerated delivery of the savings from the value creation plan defined in the investment thesis
  • Established a program to simplify and standardize the portco’s previously fragmented infrastructure
  • Used its newly created centers of excellence to drive effectiveness and efficiency in shared services within the portco, such as engineering and IT
  • Incorporated a new, enterprise-wide procurement capability that enabled the portco to capture new savings from its vendor base

Our comprehensive, collaborative approach enabled this client to quickly and fully realize $110 million in efficiency-based savings in the portco it had taken private.

AlixPartners’ ability to deliver collaborative, end-to-end support for the PE firm as they take control of a new asset and support the investment thesis for the first year of the hold period.

The model boasted several distinctive strengths. For instance, it:

  • Accelerated delivery of the savings from the value creation plan defined in the investment thesis
  • Established a program to simplify and standardize the portco’s previously fragmented infrastructure
  • Used its newly created centers of excellence to drive effectiveness and efficiency in shared services within the portco, such as engineering and IT
  • Incorporated a new, enterprise-wide procurement capability that enabled the portco to capture new savings from its vendor base

Our comprehensive, collaborative approach enabled this client to quickly and fully realize $110 million in efficiency-based savings in the portco it had taken private.

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