Our One Crowe model unlocks opportunities for private equity client

Curt Gendron, Ryan Silvino, Brian Lewis, John Brennan, Jack Heinle

When a private equity-owned company experienced growing pains, our team helped it manage a variety of challenges – and created sustainable solutions.

Going through an integration often brings up unexpected challenges – especially when you’re dealing with multiple M&A deals at the same time. For one of our private equity clients, a series of deals brought out integration issues as well as some opportunities for operational improvement. Using our One Crowe model, we were able to help address known issues, uncover unexpected challenges, and offer solutions tailored to its specific needs.

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What was the situation?

Our private equity client acquired two smaller targets, experiencing rapid, inorganic growth that consumed its leadership team’s focus. The client lacked robust internal teams, processes, and tools to help manage the integration process, resulting in disparate systems (enterprise resource planning (ERP), human resources (HR) portals, payment services, and more) with siloed reporting. While the client made initial efforts to stitch the data together into a custom data store for reporting through Microsoft Power BI™, it needed help identifying and implementing a more robust solution as well as continuous improvement initiatives. Plus, a lack of centralized strategic sourcing and procurement provided additional operational issues. With our One Crowe model, we pulled together a team composed of seasoned specialists in strategic sourcing, performance and operational improvement, data analytics, and IT advisory to address these challenges.

What were the opportunities and challenges?

The client’s leadership team had established inorganic growth and set a target for earnings before interest, taxes, depreciation, and amortization (EBITDA). However, it faced a variety of challenges. First, it needed to integrate data from a variety of source systems into a single enterprise data warehouse. Then it needed the ability to create cross-dimensional, self-serve dashboards that could be used to develop actionable insights.

In addition, the private equity client was facing sourcing issues – specifically, it had no standard way to manage materials from a cost, profitability, or performance perspective due to a lack of centralized purchasing agreements. These immature material management practices affected both productivity and morale in its team. Plus, the business was experiencing declining performance in customer service-level agreements (SLAs) and lacked a supporting accountability structure to identify the root causes.

The private equity client engaged Crowe to establish and facilitate integrations from the close of the deal through ERP integration, while simultaneously standing up an internal integration management office. The Crowe team also was engaged to conduct operational and IT due diligence on a uniquely complicated and transformational acquisition target for the client, the close of which would double the client’s revenue, technician count, and geographic coverage. Additionally, Crowe helped integrate six companies into the client’s business.

How did Crowe help?

Our team helped the private equity client develop one true, single source of data, so the resulting analytics would be an accurate representation of what’s going on in the business and could be used to make decisions about where to go next. First, we built a Microsoft Azure™ enterprise data warehouse (EDW) to assist with integration and data management, integrating data from seven different systems in the EDW, which provided the client with one source of truth to inform good decision-making. Then we used the data in the EDW and built out custom dashboards addressing everything from sales and revenue to operations and customer support to SLA and HR analytics. Using the define, measure, analyze, improve control (DMAIC) process that drives Lean Six Sigma, we helped the client through critical path process mapping, spend analytics, and contract analyses.

We also provided a variety of M&A advisory services, including operations and IT due diligence; post-merger integration support; development of integration playbook, activity plans, references, and tools; integration office training; organization design; operational expenditure reduction; and synergy tracking.

What did we uncover along the way?

Throughout the process, our team uncovered data inconsistencies and anomalies that affected the private equity client’s reporting and analytics, so we helped harmonize the metrics. Operationally, we found a lack of materials management standards (related to replenishment and stocking), formal purchasing processes, and understanding of customer SLAs. Plus, there were no standards for using the ERP system. The business had the experience and the desire to focus on data-driven measurements and solutions – it just needed additional visibility and built-up metrics to help determine if it was looking at the right data and making the right decisions for the future of the business.

From an integration perspective, our initial focus was on integrating the acquired companies into the client’s legacy ERP. However, we recognized a gap between their corporate development and integration office, so we implemented a comprehensive M&A life cycle project plan to address pre-close, post-close, and ERP integration activities. While creating this plan, we found that the acquired companies included unique service lines with different processes, and also uncovered accounts receivable challenges due to additional draw from the integrated customer base. Finally, we highlighted a variety of HR and liability challenges.

What was our solution?

After performing a variety of data-driven analyses as well as hundreds of direct stakeholder interviews, our team was able to understand the full scope of our client’s problems – and determine the true root causes. Our team created assessment reports that highlighted the depth of our investigation as well as the critical components that needed to be addressed. From there, we tailored solutions to meet the individual needs and challenges of the business.

We worked with the private equity client to build a robust and bespoke integration life cycle playbook with references, processes, and tools. Then, our team facilitated the initial deals; augmented their business capabilities during the transition; and supported the recruiting, hiring, and training of an internal client integration team so that they could be prepared for future deals. Our team also implemented flexible integration solutions for a variety of deals (including asset, stock, proprietary, and nonproprietary deals) and integrations (including consolidations, turnarounds, and add-ons).

What was the outcome for our private equity client?

With data now readily available from multiple systems, the client can create cross-dimensional analytics that pinpoint issues and performance improvement opportunities, allowing it to manage the business more effectively. Additionally, the client now has built-in enterprisewide sustainability from a data and analytics perspective – instead of relying on one or two people to pull data, it now has software to help it make data-driven decisions for the business in real time.

While each integration presents its own specific challenges, one constant is that the unexpected always should be expected. And when you work with a team that’s able to consider the big picture as it works with you to develop unique solutions, it helps do more than solve short-term challenges – it helps maximize the long-term value of your investment.

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