Private Equity: $10.5 Million EBITDA Improvement through Cross-Portfolio Spend Aggregation
Business Challenge
A private equity fund with 14 current U.S. holdings and over $3 billion in total revenue
sought to leverage its combined purchasing power to improve earnings. All of
its portfolio companies purchased similar products and services, often from
the same vendors. Each company was treated as a small customer by suppliers
and performed redundant sourcing activities. ISG was engaged to lead cross-entity
sourcing efforts.
Approach
Initially, ISG performed a Spend Analysis resulting in a clear view of cross-portfolio
expenditures. Working closely with CFOs and procurement executives, ISG executed
16 sourcing projects for areas common to some or all holdings.
Annually, ISG refreshes the Spend Analysis to assess new holdings, to identify
new opportunities, and to ensure compliance with existing contracts. ISG also
performs regular audits and reviews for some spend areas, recovering overcharges
and identifying sources of on-going improvement.
Results: $10.5 Million in Earnings Improvement and Over $75 Million in Valuation Enhancement
Savings across all projects averaged 21%. One portfolio company was recently
sold, yielding an additional $16 million in value at exit as a result of measurable
savings from these projects.
| Completed Sourcing Projects |
| LTL Freight |
Office Supplies |
| Truckload Freight |
Commercial Print |
| Small Package Shipping |
Paper |
| Telecommunications |
Uniforms |
| Wireless |
Temporary Labor |
| IT Hardware |
Travel Agency |
| IT Software |
Travel - Auto Rental |
| Video Conferencing |
Direct Materials (single holding) |
Average Savings of 21% on $50 million in Spend
| Audit and Recovery |
Results |
| Small Parcel Audit |
3% |
| Federal Excise Tax (FET) Recovery |
2% |
ISG maintains an on-going relationship with this client and is currently sourcing
multiple categories including $5 million in corrugated spend.
