Food Manufacturer
SITUATION
Our client was a company specializing in the manufacture of a Mexican specialty food item. The company had been owned by a private equity firm for three years, and during those three years sales had grown from $36 million to $44 million. At issue was the fact that, in spite of sales growth, EBITDA had dropped from $4.5 million to $4 million during that same period of time.
The private equity firm owning the company, noting high sales multiples in the market, made a decision to exit their investment. CRP was engaged to review operations and see what could be done to enhance EBITDA — quickly — to allow successful exit within a year.
CRP’S APPROACH
Immediately upon being engaged, CRP visited with management and the private equity firm together to insure that everyone’s goals were congruent. Then, CRP made plant tours to view operations, meet with key personnel and review the books and records of the company. After three weeks, CRP professionals were able to put together a list of actions totaling $2.5 million in potential EBITDA improvement.
Once that list was complete, CRP held subsequent meetings with the management team to establish capital improvement requirements, prioritize EBITDA improvement options, establish resource requirements, set priorities, assign responsibilities to key individuals and agree on timing. With CRP helping guide the management team, EBITDA improvement steps were quickly put in place.
RESULTS
- CRP’s EBITDA improvement plan was rapidly realized through
tactical steps in several key areas:
- Overhead reductions
- Operational improvements
- Process improvements / waste reduction
- Improved brokers contracts
- Within 6 weeks the company was on a path to increase EBITDA from $4 million to $6.5 million.
- Because of management cooperation and no need for CRP to provide implementation, CRP’s services cost the company less than $30,000.
- In just six short weeks, that $30,000 expense resulted in $2.5 million improvement in EBITDA, adding $17.5 million in value to the company under current market multiples.