Maximizing Value in Private Equity Through Portfolio Optimization

The Problem:

A volatile, uncertain, complex, and ambiguous (VUCA) business landscape — including changing regulations, tariffs, and global economics — challenges private equity (PE) firms as they seek to get maximum returns from their portfolio of assets.

The Solution:

In response to business challenges, many PE firms are trying to optimize their portfolio companies’ networks of plants, assets, and suppliers to increase value and returns. Few PE firms can do this alone, and they’re turning to the EFESO Asset Portfolio Optimization approach, which has rapidly reconfigured sourcing and production networks, decreased network costs, and increased profits from the same or fewer assets and investments via:

• Value-Chain Optimization considers the holistic value-chain and identifies the means to establish an agile, resilient, and more efficient value chain.
• Network Footprint Optimization evaluates the location of assets and establishes a new network that produces in the best locations in response to current and future demand and facilities’ capabilities and capacity.
• Node Optimization identifies wastes and weaknesses of plants and closes those gaps through the application of lean techniques to improve quality, cost, and delivery.

EFESO subject matter experts bring deep industry and operations experience to clients as we not only assess and set strategy for reconfigured assets, we are on the ground with PortCo (Portfolio Company) management to execute on those plans. In as little as six months, we’ve delivered sustainable result to PE firms, including 5-9% revenue increase, 6-10% EBIT increase, 20% to 30% reduced capital spend.

As private equity (PE) firms manage multisite portfolio companies toward three- to five-year sales horizons, both the holding companies and their PortCos are confronting a volatile, uncertain, complex, and ambiguous (VUCA) business landscape that challenges them as they seek to get maximum returns from their assets: Regulatory changes and new tariffs and trade rules derail plans for supply chains and plants. Unpredictable global economics and pricing shift low-cost capabilities around the world. Emerging technologies and geographic market trends offer up new opportunities for growth as well as new competition.

In response to this demanding and fluid business environment, many PE firms are looking to optimize PortCos’ networks of plants, assets, and suppliers to increase value and returns. But this is no small task, and few PE firms or the companies they hold have the inhouse resources and experience to effectively take on these activities. Many are turning to EFESO, which has rapidly reconfigured sourcing and production networks, decreased network costs (from 20% to 40% in total landed cost savings), and increased profits from the same or fewer assets and investments. The EFESO Asset Portfolio Optimization approach includes:

• Value-Chain Optimization: Many companies’ collections of facilities and suppliers are not the result of a grand design scheme. They grew organically based on a need or opportunity, and often continue to exist as they always have because they always have. We go in and consider the holistic value-chain: quantifying all costs across all components and the many handoffs in between; identifying hidden wastes, areas of poor performance, and potential savings; and de-risking the value chain in the face of current and pending regional regulations. The result is an agile, resilient, and more efficient value chain able to swiftly capitalize on emerging value-creation opportunities.
• Network Footprint Optimization: The location of assets should rarely be considered fixed. As markets emerge and others subside, demand requirements for PortCos and their plants and production lines should change accordingly. EFESO helps PortCos by identifying and leveraging opportunities relative to market fluctuations and facility capabilities and capacities — determining where and how goods should be produced (make vs. buy). We establish and execute a clear, phased transition plan (moving lines, opening plants, closing facilities, etc.) that rapidly establishes a new, value-creating network that produces in the best locations in response to demand — today and tomorrow.
• Node Optimization: Even assets in the right locations and producing the right goods can be fraught with inefficiencies and wastes. We assess existing sites, benchmarking performances against best-in-class capabilities, and then — guided by our operational excellence subject matter experts (SMEs) — show and deliver results through the application of lean techniques. The improvements to quality, cost, and delivery dramatically impact a facility’s return on capital. We also establish sustainable operations that address current and future ESG requirements.

The EFESO Asset Portfolio Optimization approach is unique in that we not only work collaboratively with PE clients and PortCos to identify portfolio value-creation opportunities, but our SMEs are on the ground executing with them to make value creation happen — from ideation to sustainable P&L impact. This starts with strategy and proceeds through four demanding stages of execution.