Private equity

Operations transformation is a significant opportunity for investment funds to create value in their acquisitions when following a buy and build strategy. There are three stages that are critical to investors: the operational due diligence phase, the implementation of transformation plans of portfolio companies and the post-merger integration phase.

Challenges

The operational due diligence phase must highlight key risks and opportunities of the current situation and of the business plan. Characterized by limited access to time and data, this step requires a high level of expertise to identify and assess risks.
The next step is to ensure operations are managed effectively to maintain continuity during the closing phase. The identified levers for business improvement in the due diligence phase need to be studied in detail and implemented on the ground in collaboration with operational teams. These include cash optimization, cost reduction plans, support function reorganization, service level improvement, and adaptation of operations to support growth ambitions, amongst others.
Bringing in expertise in operations speeds-up the integration of operational teams, leaving the development of initiatives to the current management.
In build-up situations, Post-merger integration (PMI) phases should define and implement a targeted organization structure, identify synergies and build a strategy to integrate the transformation on the ground.

How we can help

Argon & Co supports its private equity clients throughout the entire investment lifecycle; from operational due diligence to the implementation of competitiveness plans and PMI. We can help you with:

Operational due diligence
Operational process improvement including R&D, procurement, logistics, IT and support functions
Field services transformation
Cost reduction and cash optimization

Private equity case studies

Supply chain due diligence

winter sports specialty retailer

Supply chain due diligence

Christy Sports is one of the largest winter sports specialty retailers with more than 55 locations in the western United States. They offer a wide range of equipment sales and rental services to customers through metro and mountain-based locations. During the off-season, Christy sells and delivers Patio Furniture.

Private Equity firm TZP was planning to acquire Christy’s and retained us to perform due diligence of the supply chain strategies and operations.

Perform assessment of supply chain with focus on buying/ inventory management, warehouse operations, transportation and supporting technologies
Review supply chain cost structures, identify savings opportunities or reporting gaps
Identify significant supply chain risks that could result in business disruption
Evaluate ability of the supply chain to support strategic vision for growth, channel expansion and digital transformation

Completed due diligence assessment within a narrow deal window
Acquisition was successfully completed following assessment
Identified opportunities to improve warehouse efficiency and better manage assets
Recommended cost tracking changes to improve visibility of true cost for retail and rental businesses
Highlighted risks and mitigation strategies in ERP upgrade and options to positively impact supply chain operations

Supply chain contingency planning for carve-out

private equity

Supply chain contingency planning for carve-out

OpCapita is a London-based private investment firm that transforms operationally underperforming businesses in the retail, consumer and leisure industries across Europe and North America to deliver sustainable profit improvement and superior investment returns.

OpCapita was seeking a consulting partner to assess the current state and formulate a future state strategy to carve out the supply chain of a newly acquired 900 store retail and eCommerce business.

Perform a detailed assessment of the current state used by the prior parent company to service the acquired business
Review transportation and distribution operations for retail and eCommerce channels
Develop a future state strategy based on third-party logistics (3PL) services and providers
Develop process to qualify and evaluate potential 3PL partners
Program management leadership and implementation support through transition and start-up of the 3PL partner

A request for information (RFI) process was designed to qualify and narrow the 3PL candidates to the most relevant
A detailed request for proposal document (RFP) was created to detail business requirements and instruct short listed providers on proposal preparation
Developed and facilitated process to evaluate and select the preferred 3PL partner
Final partner selection and implementation is pending

Generating demand requirements

grocery home shopping

Generating demand requirements

Working on behalf of private equity partners, we were asked to evaluate the potential scale of opportunity around the joint venture between two grocery retailers.

A British online supermarket that describes itself as ‘the world’s largest dedicated online grocery retailer’. The company has no chain of stores and does all home deliveries from its highly automated fulfilment centres.

An American retail company founded 1883. It is the United States’ largest supermarket by revenue and the country’s second-largest general retailer.

Generate a demand profile for the USA based on known parameters such as population density, GDP, spend propensity, market density and online grocery penetration
Agree specific scenarios for modelling and key sensitivities for evaluation
Create a bespoke distribution model to identify the full distribution network required to service the future market
Evaluate a range of options, determine the likely investments required and the returns on capital

Created a bespoke demand model that converted key assumptions and parameters into a useable set of inputs for logistics modelling
Developed a national network model at zip-code level, identified distribution solutions ranging from 50 warehouses to more than 200, aligned with market penetration and cost
Results covered service levels achievable, capex and opex for the network and insight into key cost levers and clear identification of the cost structure for investment

Operational due diligence

private equity

Operational due diligence

Elysian Capital is a private equity firm that aims to partner with aspirational management teams, by acquiring majority stakes in growth businesses valued between £20 million and £100 million.

Elysian was looking to acquire a £100m turnover, founder-managed business that designs and sources licensed merchandise (toys, arts & crafts, stationery, bags and wheeled goods) from the Far East and distributes them across the European market.

Complete a due diligence assessment on the company’s supply chain operations in both UK and Far East
Identify the key supply chain risks that Elysian would need to monitor, especially in the areas of compliance to licensor instructions
Identify supply chain improvements and risk mitigation actions to address the high levels of working capital caused by the long supply lead-times

The target had no areas of serious operational risk, although there were a number of areas that would require tightening up post acquisition
We also identified eight supply chain performance enhancement opportunities in the areas of forecasting, inventory management, near-shoring and supplier segmentation
Elysian acquired the target and engaged us to conduct detailed evaluation of the identified improvement areas