Specialty Components Platform: Operational Turnaround and Growth
A carve-out acquisition of a specialty engineered components business, stabilized through operational improvements and repositioned for growth.
Situation
The target was a division of a larger industrial conglomerate, suffering from underinvestment, inefficient operations, and declining customer satisfaction. The parent company sought to divest non-core assets, creating an opportunity to acquire a fundamentally sound business at an attractive valuation.
Investment Thesis
We identified significant potential to improve margins through lean manufacturing, modernize the sales organization, and expand into adjacent end markets. The business served mission-critical applications with high switching costs, providing defensible customer relationships and pricing power if operational issues could be resolved.
Value Creation
- Implemented lean manufacturing principles, reducing waste and improving on-time delivery from 72% to 94% within 18 months
- Upgraded ERP and CRM systems to provide real-time visibility into production schedules and customer orders
- Restructured sales team with focus on key account management and cross-selling into adjacent product lines
- Recruited experienced COO to lead operational transformation and drive continuous improvement culture
- Expanded into two adjacent geographies through targeted hiring and customer development efforts
Outcome
The business achieved significant operational improvements, with EBITDA margins expanding by over 500 basis points and revenue growing at a double-digit CAGR. Customer satisfaction scores improved materially, leading to contract renewals and wallet-share gains with key accounts. The company is now well-positioned for sustained growth and value creation.
Transaction Context
The acquisition was structured as a carve-out from a multi-billion-dollar industrial conglomerate. The target had been neglected for several years, with limited capital investment and minimal management attention. Despite these challenges, the underlying business served attractive end markets with defensible competitive positions.
Our diligence process identified the root causes of underperformance: outdated manufacturing processes, lack of sales discipline, and insufficient investment in technology and talent. We developed a detailed 100-day plan to stabilize operations and a multi-year roadmap for growth.
Execution Highlights
Phase 1: Stabilization (Months 1-6)
The first priority was operational stability. We worked closely with the existing plant management to implement 5S methodology, establish daily production meetings, and create clear accountability for quality and delivery metrics. Early wins built momentum and demonstrated that improvement was possible.
Phase 2: Technology and Talent (Months 6-18)
With operations stabilized, we invested in systems and people. A new ERP system provided real-time visibility, enabling better planning and faster response to customer needs. Key hires in operations, sales, and finance brought fresh perspectives and deep functional expertise.
Phase 3: Growth Initiatives (Months 18+)
With a strong operational foundation, the company turned to growth. The sales team expanded into new geographies and adjacent product lines, leveraging existing customer relationships and technical capabilities. Margin expansion funded these investments, creating a virtuous cycle of improvement and growth.
Lessons Learned
- Operations first: Fixing the fundamentals—quality, delivery, cost—builds credibility and cash flow needed for growth investments.
- Talent matters: Recruiting the right leaders accelerates progress and builds organizational capability for sustained performance.
- Customer feedback: Listening to customers surfaced both quick wins (delivery reliability) and longer-term opportunities (new product development).
Current Status
The business continues to perform well, with consistent revenue growth, margin expansion, and high customer retention. The management team has successfully integrated several bolt-on acquisitions, further strengthening the platform's market position.
This case study is provided for illustrative purposes only. Results are not indicative of future performance, and individual experiences may vary.
Information provided is for illustrative and educational purposes only and does not constitute an offer to sell or a solicitation to buy any security or investment product. Past performance is not indicative of future results. Nothing contained herein should be construed as investment, legal, or tax advice. Prospective investors should consult with their own advisors before making any investment decisions.