Virtas Partners was engaged by a power equipment manufacturer to assess and recommend opportunities for SG&A cost optimization in the context of re-negotiating a lending agreement
Client Need
Our privately held client was experiencing industry-wide headwinds driven by seasonal factors and overproduction after achieving record growth in 2020 and 2021. The resulting financial performance was putting pressure on the process of extending the company’s debt facility. The client’s banking partners directed the company to bring in outside advisors to provide an independent view on the potential for selling, general and administrative (SG&A) cost reduction in addition to client’s on-going efforts.
Tailored Solutions
- Co-developed appropriate in-scope perimeter, including some cost centers and employee categories outside of traditional SG&A definition
- Leveraged executive management team and existing reporting to define functional headcount and 3rd party cost baselines to enable benchmarking
- Coordinated with concurrent company effort on cash flow forecast, and considered other recent company-initiated cost optimization efforts
- Identified opportunities totaling 11% to 17% of cost baseline across corporate, operations, engineering, marketing, aftermarket, IT, finance & HR
- Briefed management on opportunity areas, attrition strategy and contingency planning based on business performance
Value to client
- Clearer understanding of value creation opportunities and approaches to optimize costs
- Outside-in, third-party perspective on hypotheses around how company could be re-organized
- Optionality to consider what actions to take based on potential scenarios for business changes in upcoming fiscal year
Capabilities
- Industry and cross-functional experience
- Cost optimization and performance improvement
- Contextual awareness