Portfolio Company Rapid Return Through Operational Improvement

Case Study: Middle-Market Private Equity Firm

Private equity portfolio company staged for 28% gains in 15 weeks.

In the fall of 2013, a leading middle-market private equity firm acquired a services company, but it needed to reduce costs and position the company for growth – quickly. Looking for a partner to identify clearly measureable financial gains, the firm tapped Big Sky Associates.

Together, the private equity firm, the portfolio company and Big Sky pinpointed near- and long-term opportunities for value creation. The portfolio company had an excellent track record and a solid customer base, but it needed to reduce the cycle time of its core processes and better manage customers’ variation in demand – including rapid growth – all without sacrificing the quality of its products or reputation.

Big Sky deployed its Process Improvement and SkySolve™ financial data analysis tools to achieve results in just 15 weeks.

To solve this challenge, Big Sky used a 4-stage approach:

Define: Big Sky helped the private equity firm and portfolio company leadership identify the project’s measurable financial goals.

Visualize: Big Sky facilitated a value stream mapping session to visualize core operational processes and layer financial and operational data, collected from comprehensive data gathering and statistical analysis.

Prioritize: Big Sky held sessions with key client team members to develop a wide variety of operational improvements, evaluate alternatives, prioritize them based on explicit criteria and select the best approach.

Realize: Big Sky developed specific recommendations, measured their quantitative and qualitative benefits and developed an implementation plan that included three major phases and a variety of “quick wins” to help the portfolio company realize value creation as rapidly as possible. For each of the recommendations, Big Sky also developed detailed implementation plans, including governance structures, timelines, costs and key performance indicators.

By building a custom SkySolve™ model of the company’s core processes, Big Sky was able to track costs, resources and process efficiency. This tailored model allowed for one-click testing of scenarios and showed how Big Sky’s recommendations affected results in just 15 weeks.

Jointly, the middle-market private equity firm, the portfolio company and Big Sky designed a solution to save the portfolio company $1.5 million in annual costs and realize 28% potential capacity gains in just 15 weeks. These savings represented a 4.3% return on investment for the private equity firm and positioned the portfolio company to undertake larger contracts in the future.

For an even greater portfolio company rapid return on investment, Big Sky also identified several “quick wins” – savings opportunities that could be implemented in less than two weeks and save money right away. With the quick wins alone, in just 12 weeks the portfolio company saved more than Big Sky’s total fees in direct costs and triple those fees in indirect costs.