Performance | Dirigeants & Investisseurs

The upstream Operational Audit is the backbone of the intervention.

It is identifies root causes of the business under-performance and its key success factors.

It sets guidelines for the Operational Performance Improvement Plan in itself and its modus operandi: what to do and above all how to do it, keeping in mind we are not sacrificing the future of the company on the altar of emergency….

It quantifies and plans in advance expected outcomes in terms of value creation and cash position.

It stands as an instruction manual for guiding the company towards sustainable improvement of its economic performance.

Back on the path to performance

The business is not at risk in the near future but its gross operating surplus – its capacity to generate cash flows – is a few points below its competitors. Unfortunately, its sector of activity is capital-intensive. In a few years’ time, its inability to invest at the same level as its competitors may endanger its independance or even rule it out.

The audit clearly identifies root causes of this situation. It enables the company to deal with the risk and leads it towards its target profitability. Starting up on a healthier basis, new top management in charge of steering the company on a long-term-basis will be able to focus on outperforming in their market.

Case study: an example in the fine chemical sector

Baseline situation :

A listed underperforming international company in the chemistry sector (pharmacy and fine chemistry). Turnover > 150 M€ and staffed by around 1,000 employees.
The President of the company solicits D&I to identify progress actions likely to improve EBITDA and then implement the plan for progress.

The audit

Set up 8 week period, it highlights weak spots regarding how improvement actions are monitored (those already taken and those that have yet to be launched). It also highlights the need for a proper steering and management tool in order to keep an eye on both operations and transformation.
It lays down solid foundation for the R&D action plan, cost reduction, industrial restructuring, deployment of the supply chain, project management, implementation of investments required and redesign of overall management tool. Eventually, the audit stresses the need to create an Operations Department.

Conducting the improvement plan

The D&I partner who took part in the audit and who is now in charge of the improvement plan creates the Operations Department along with the CEO. This D&I partner leads R&D, the industrial activity and the supply chain. Management control is also revisited in view of a more proactive and relevant steering.
A new Operations Director is appointed with the aim of sustaining both the newly established organisation and the newly implemented methods. His or her one goal : continue to provide momentum.
The D&I partner ensures smooth transfer of methods. EBITDA is increased by 5.5 points on a full year basis.

Optimising and mobilising the whole structure

The company finds it difficult to keep its charges and its margins under control. Its cash-flow situation deteriorates. The need for working capital is too great. Shareholders are running out of patience. It is necessary to restore control over the business management and to mobilise top executives accordingly. This transformation is inconceivable if management, prescribers and ideally all corporate stakeholders (employees, partners, key suppliers, shareholders, etc.) do not understand and assume ownership of this situation.

The Operational Audit is based on interviews of key actors, regardless of their hierarchic level. This audit is then broadly shared with everybody during a formal meeting. Financing and human resources requirements have been defined precisely as well as their essential evolution. All conditions are put in place for the success of the Plan.

Case study : an example in speciality electronics

The Audit

It is carried out in 6 weeks. Over this period, it is discussed with the CEO, then with the Executive Committee and finally validated by the Board of Directors.
It sets out an action plan mainly focused on studies’ production and cost-control issues.
It highlights commercial shortcomings with the most significant impact on margins.
It also brings out managerial flaws

Plan of improvement

The D&I partner in charge of the progress plan is also the one who previously conducted the audit. He/She is appointed Director alongside the Chairman.
The latter partner takes over operations. As such, he/she heads the Executive Committee.
A scheme of regular control including technical and commercial teams is put in place.
Corporate organisation is modified in order to sustain newly implemented managerial methods. A position of COO is created and successfully assigned to a member of the company.
The D&I partner withdraws from the company once the transition is complete with an EBITDA increase of +5 points.

A successful carve-out

A non-strategic activity is to be divested. Carving-out poses many difficulties:

human: employees need to accept the sale of the business. The corresponding change of environment might prove to be stressful and require the implementation of often complex labour negotiations.
organisational: style of management must be tailored to the transferee or adapted to an environment of greater autonomy. Information systems and control procedures must be revisited (disconnection with the group, replacement with newer systems, integration with the transferee’s information system, etc.).
operational: optimise financial needs, maintain/improve economic performance.
legal: carving out the activity towards an independent legal framework.

The Audit sifted and processed all necessary conditions. D&I can know assume the operational management of the business in order to conduct the predefined Plan, ensure a smooth transition between the current company and the new transferee, avoid any conflict of interest involving the incumbent director, etc.

Case study : an example in Metallurgy Industry

Baseline situation

Metal industry company with a turnover of 50M€ and more than 250 employees. Two very different businesses: boiler making and mechanics.

The chairman wishes to carve out the boiler making activity into a subsidiary in order to subsequently sell it.

Major topics of work

Put in place relevant organisations that allow stand each business to be managed separatly as long they were historicaly strongly combined (procurement, logistics, Design Office, IT, accounting, HR, finances, sales departement), taking into account the social environment and difficult relations with unions.
Implement management tools for the new business.
Separate business activities with space and transformation costs savings.
Divest former premises that are no longer useful.
Implement a new ERP in line with the activity of the subsidiary.
Conduct the change management for people concerned with the new company project.

How to succeed in a new acquisition

A new acquisition has just been signed. The well-known first 100 days is beginning and the company has to immediately adopt the good tempo of the business plan.

The Audit assessed the compatibility between business plan objectives and the characteristics of the company which were fully considered : market position, organisation and management methods, HR potential, industrial tools, information and control systems, etc.). The main objective is to quickly prepare the company to face the challenges of the new business plan and choose the relevant KPI. To help the actual CEO in that transformation, D&I Partner will assist him and share his experience of that kind of situation.

Case study: an example in the education sector

Baseline situation:

management is demotivated
product-offer is unclear and the product catalog is overabundant
sales efficiency is under standards
indirect costs are too high
EBITDA is declining and cash is burning

The implemented Action Plan:

a new organisation is set up
sales organization and compensation plan are revisited (incentives, optimization of sectors)
savings are led on overhead expenses
many internal processes are simplified
overtime is controlled
relations with employees representatives are set on new basis
cash collection procedures are put in place

Consequently, EBITDA is improved by 25% and treasury is back.

Securing an ambitious growth plan

Investors have committed substantial funding to the company on the basis of a very ambitious business plan. A few years later, the results have not met the expectations : the fundamentals of the activity are still promising but real growth rate is dramaticaly underperforming. Development opportunities are numerous but the ability of the management team to catch and transform them is under questions.

The Audit held with the internal teams showed a lot of issues hampering a good execution (products/markets, organisation/structure, R&D/production, management systems). Whereas the incumbent director remains often focused on business development (his/her first area of expertise), D&I knows how to ensure operational management of the company’s transformation.

Case study: an example in building protection

The situation

The corporate group is financing its internationalization growth through acquisition and the development of new platform of innovative products. He received important equity funding. However, 2 years later, performance does not meet BP’s expectations.

many strengths: technical know-how, product quality, growing reputation, skilled and motivated staff.
recurring flaws: weak customer service, chronic delays in R&D, no real team work, accumulation of unresolved problems which create weariness, ineffective project monitoring.

Implemented Action Plan

Immediate focus on resolution of the customer service issues.
Formalisation the commercial action plan (targets, responsibilities, methods, competitive environment, etc.).
Reinforcement of the regional coverage (services).
Adoption of a full management control.
R&D roadmap.
On an international level, ranking of the operational priorities.

Back to performance

Back to performance

Optimising and mobilising the whole structure

Optimising and mobilising the whole structure

A successful carve-out

A successful carve-out

How to succeed in a new acquisition

How to succeed in a new acquisition

Securing an ambitious growth plan

Securing an ambitious growth plan

Back on the path to performance

Case study: an example in the fine chemical sector

Optimising and mobilising the whole structure

Case study : an example in speciality electronics

A successful carve-out

Case study : an example in Metallurgy Industry

How to succeed in a new acquisition

Case study: an example in the education sector

Securing an ambitious growth plan

Case study: an example in building protection

D&I : En renfort des participations du private equity