Enterprise Value Creation
How did a private-equity owned specialty distributor enhance margins before going to market? Find out in this success story.
A private-equity owned specialty distributor wanted to enhance margins before going to market and engaged INSIGHT2PROFIT eight months prior to the transaction.
The Result: $3M EBITDA Improvement (annualized).
Early Engagement on Sell-Side Diligence Drives $24M+ in Enterprise Value Creation. Utilizing sell-side Quality of PricingSM (QoP®), INSIGHT collaborated with the company to identify and execute on strategic pricing opportunities and worked in conjunction with the investment bank to show realized EBITDA impact and incremental EBITDA growth opportunities in the CIM and marketing materials. After the transaction, the acquiring private equity retained INSIGHT to manage and execute the opportunity roadmap.
The QoP assessment quickly revealed an unstructured pricing strategy creating significant variation:
- Indiscriminate “peanut-butter” spread approach to pricing lacking customer and product segmentation
- Limited pricing structure and process
- Commercial team infrequently selling on value and discussing price with customers
- Inability to analyze and report at the customer and product levels
The QoP assessment identified immediate opportunities for price differentiation to yield financial impact pre-transaction and multiple incremental margin improvement areas. The new strategic price increases were based on sales velocity, market pricing, margin floors, and volume discount caps. INSIGHT also developed an opportunity roadmap that identified incremental profit improvements.
- Identified relevant price drivers for pricing model and additional customer and product attributes to enable critical granular data analytics (growth accounts, competitor pricing, etc.)
- Established new list prices based on good/better/best value proposition
- Implemented differentiated value-based price adjustments based on vendor and product category
- Created formal sales processes and account ownership, and built pricing confidence across the organization through INSIGHT’S salesforce effectiveness program – including workflows, playbooks, trainings, KPIs, and sales operations
- Developed a path to implementation with both quick wins and longer-term improvement areas such as price optimization, segmentation, and cross selling
The distributor implemented the differentiated price increase and immediately began realizing and measuring impact – $3 million on an annualized basis during the first three months post-implementation ($3M EBITDA lift equates to $24M in enterprise value based on conservative 8x EBITDA multiple). The expected incremental annualized profit and the roadmap of another $6 million of potential profit opportunities were included in the management presentation and CIM, arming the investment bank with the rationale for the proforma EBITDA adjustments and growth plan for the business.