Private equity

Argon supports funds from securing acquisitions during the due diligence period to the implementation of post-acquisition performance plans, with a focus on cost and cash optimization

Context

Investment funds have acknowledged Operations as a driver of value creation. There are three critical steps for funds:

  • Operational due diligence
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  • Implementation of operational performance plans for portfolio companies (cash flow optimization, cost-cutting, lean initiatives, reorganization of support services, etc.)
  • Post-merger integrations, with a build-up approach

Challenges

The successful outcome of an operational due diligence depends on two key factors:

1.    A high level of functional and sectoral expertise: an increasing number of funds are entrusting operational due diligence to experts, such as Argon Consulting, as they believe that specialist transaction or strategy consulting teams are not always able to comprehend the operational complexity of the target

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2.    A focus on the key elements of the project: analyzing the risks and identifying any potential upsides (or downsides) are essential parts of a due diligence period. Given the deadlines, that is only possible with a high level of expertise, and by identifying the key operational areas to audit in advance

Investors must ensure the effective management of pre-closing/post-closing continuity: value creation levers identified in the due diligence phase must be analyzed in further detail and implemented with operational teams following the acquisition.  The contribution of state-of-the-art expertise on operations acts as a catalyst for leveraging operational management capacity, while leaving the initiative to existing management.

By implementing cost reduction or cash flow optimization plans, it is possible to address the value chain as a whole. Although the initiatives required depend on the industry, they cover practically all operations-related processes (R&D, procurement, production and maintenance, logistics, supply chain and function support).

During the build-up, the post-merger integration (PMI) phase is critical to the success of the acquisition. Once the company has been acquired, the outcome of the due diligence must be the starting point for setting out the business integration plan.

Post-merger integrations must include short-term measures for the phases following the closure, and longer-term measures for implementing the target organization:

  • Identification of potential synergies and integration planning
  • Development of an integration strategy and introduction of periodical monitoring measures during the integration phase (PMI scorecard)
  • Management and monitoring of the integration program
  • Support for the function teams working on the integration

 

How can Argon Consulting help you?

Argon Consulting guides its Private Equity clients through every phase of the investment lifecycle, from operational due diligence to the implementation of competitive advantage strategies, including the PMI phase. Argon's strength – which lies in its expertise – is to be able to drive operational teams. This is crucial since cost and cash-flow optimization are company-wide initiatives and are therefore hard for management to implement.

We provide supporting the diagnostic and operational implementation phases to help you achieve cost competitiveness and cash optimization. We focus on:

  • Procurement performance: analyzing levers, opportunities, and procurement action plans, reviewing make or buy opportunities, and analyzing redesign-to-cost levers
  • Manufacturing: increasing cash flow and mobilizing production teams to comply with lead times and reduce production cycles (lean), ensuring the viability of industrial resources, etc.
  • Supply chain planning: limiting uncertainty, ensuring better anticipation and improved risk management to balance supply and demand (eg. supply, production, distribution), improving the placement and levels of inventory, setting good service rate targets, etc.
  • Logistics: rethinking the service range, providing an efficient and reliable distribution network that is responsive to uncertainties in demand, analyzing the productivity of operations (warehousing, transport)
  • Research and development: reducing development cycles, designing products with improved manufacturability, (internal or external), etc.
  • IT: taking advantage of the tools available or developing them to support initiatives and promote the information transfer, collaboration, and decision-making
  • Support functions: optimizing the effectiveness of support functions (shared services, organization, BPO, etc.).

 

Argon Consulting's clients include:

Sun Capital Partners, LBO France, Mid Ocean, Allianz Private Equity, CDC Capital Investissement, Cinven, Arcapita, Time Equity Partners, Merchant  Equity Partners, Chamonix Private Equity, Abenex Capital, Better Capital, Alchemy and Electra Partners

Case Studies

Operational due diligence in the acquisition of a specialized retailer by an investment fund
A purchasing globalization initiative for the companies in the portfolio of an investment fund in Europe