How Pricing Optimization Helped Improve Post-M&A Margins

Two professionals sitting in chairs, one with a laptop, reviewing post-M&A margins.

At a glance

Crowe helped a private equity-backed construction subcontractor address margin erosion and unlock more than $100 million in price-related revenue.

Rapid expansion through private equity investments combined with cost increases created margin pressure and limited visibility. The Crowe team helped this client improve pricing transparency, reporting, accountability, and forecasting so it could identify sources of margin leakage and act on pricing opportunities.

Client

A private equity-backed, multibillion-dollar construction subcontracting services provider needed to address margin erosion.

Crowe solutions

Pricing and margin optimization solutions

More than 200 basis points annualized increase

Crowe helped the company increase pricing and margin across high-volume commodities.

More than $100 million of increased price-related revenue

The client captured significant value through improved pricing strategy provided by the Crowe team.

Visibility into pricing and margin leakage

The Crowe team created clearer insight into margin leakage sources so the client could act faster.

More than $50 million in price coverage

The company expanded pricing coverage across more than $50 million in revenue and enabled more consistent pricing decisions and stronger margin management.

Pricing and margin optimization solutions

Our transformative pricing and margin strategies can help maximize profitability and operational performance in your business.

The challenge

The company’s rapid expansion through private equity investments combined multiple market-based businesses with different approaches and cultures, which resulted in a lack of visibility across the business. During that time, the cost of materials rose rapidly with no effective way to pass those price increases through to help manage margin erosion. As a result, the company experienced a significant increase in labor costs. This delayed reaction quickly eroded the combined company’s margins.

One of the acquired companies was already working with a Crowe team when it noticed this erosion in margin, and it called in our pricing and margin optimization team to help determine the cause and help plan for next steps.

Our team identified the following data-tracking gaps.

Pricing data was neither centralized nor readily available to team members.
Senior leaders were responsible for tasks that should not have been performed at their levels.
Limited details and delayed reporting led to a variety of challenges.
Lack of standardized processes led to miscommunication and unreliable data.
Minimal visibility of sales numbers led to gaps in compensation and recognition and to other challenges.

How Crowe helped

Using a two-phase approach, the Crowe pricing and margin optimization team conducted a rapid assessment that identified numerous gaps and reporting challenges regarding financial performance.

During the assessment, the Crowe team identified four transformational actions to help improve margin and forecasting and recommended that the company:

Create a centralized repository with automated reporting and notifications
Standardize timing calculations for higher forecasting accuracy
Integrate financial reporting for real-time margin gap notification and price action opportunities
Develop an accountability process to improve negotiated price realization on a weekly basis

The solutions

The Crowe pricing and margin optimization team developed and implemented Microsoft™-based tools to help track the entire price action life cycle: target-setting, negotiation, acceptance, contract, and validation. One of these tools, a price increase tracker report, was developed with the Microsoft Power BI™ solution to significantly reduce the time needed to gather and consolidate data and publish reports related to pricing and financials.

Through key stakeholder interviews, our team also designed a pricing strategy to identify opportunities among different customer and pricing segmentations, internal controls, and external factors to capture and sustain improved margins. These margin enhancement strategies were deployed and captured through bid negotiations, change order management, work-in-progress reviews, and contract pricing sign-off.

The One Crowe approach

Our team was on-site to work with the client throughout this process, and it and trained account executives and operational and support people on the process so they could do it themselves. This approach provided clients with insights and improved visibility that allowed the client to develop and execute a new business strategy.

The results

Working with the Crowe team and implementing the policies, process, and tools Crowe developed in conjunction with company allowed the company to:

Improve job cost margins
Improve sales and margin forecasts
Realize pricing and margin increases across high-volume commodities
Standardize a collaborative, shared list with detailed pricing elements
Collect pricing elements at each stage of process: target, proposal, and accepted
Report data collection on an hourly basis

Standardize exports for financial planning and analysis to model in conjunction with pipeline and backlog
Standardize and automate the exceptions approval process
Achieve visibility into pricing acceptance
Improve communication flow from sourcing to sales
Enable margin reporting

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Work with us

Our team offers pricing expertise across a variety of industries, end markets, and business maturity levels. Contact us to see how we can help your business maximize value.