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Alvarez & Marsal Debuts PE Cost Optimization Service for Investors in Distressed Firms

April 05, 2019, 08:55 AM
Filed Under: Industry News
Related: Alvarez & Marsal

Alvarez & Marsal (A&M) announced the formal establishment of its Cost Optimization service offering within its Private Equity Performance Improvement group. Led by Managing Directors Michael Beetz in San Francisco, and Cliff Hall and Markus Lahrkamp in New York, the new service offering has been developed for private equity investors in portfolio companies that are facing challenges in revenue growth and are in need of meaningful and sustainable improvements in cost structure and operations.

“Private equity investors have historically relied heavily on revenue growth to increase the investment multiple of their portfolio companies and pushing the top-line higher often means adding complexity through geographic expansion, new products and channels, or acquisition.  When growth rates begin to stall, these companies can find themselves in very difficult situations if cost and efficiency have been sacrificed to chase growth,” said Beetz. “Our goal is to help investors understand the cost and efficiency level that makes sense for their portfolio companies; and help those who have exceeded that level get to a cost structure that works for sustained profitability.”

The A&M Cost Optimization service offering is a proven solution for maximizing meaningful, step-change improvements in cost structure. By increasing transparency, reducing complexity and changing how the business operates, A&M’s hands-on practitioners and fact-based methodology generates substantial improvements for portfolio companies in situations where revenue growth has led to decrease in absolute and relative profitability.

“Without an efficient cost structure, continued prioritization of growth over efficiency can lead to situations where portfolio companies experience a sudden deterioration of profitability and negative leverage ratios that put stress on cash resources. When this happens, urgent change is needed,” said Hall.

Lahrkamp added: “Through our Cost Optimization process and experience, investors will understand how to make changes on an operational level, as well as reset the cost structure to sustainable levels that are in line with reasonable top-line expectations. This is the type of return-on-consulting (ROC) that private equity investors are used to receiving when working with A&M.”

Beetz has over 18 years of performance improvement and advisory experience and has advised private equity sponsors and corporate executives across a wide range of industries. As the co-founder of A&M’s Cost Optimization service offering, he has led numerous projects for private equity-backed portfolio companies using the Cost Optimization methodology. These engagements have resulted in double-digit improvement to EBITDA as well as sustained operational efficiency.

A seasoned senior executive in both the corporate and consulting arenas, Hall brings more than 25 years of experience in a range of management and board advisory, operational and functional roles in the Americas, Europe and Asia. His functional areas of focus include operations performance improvement, pre-acquisition due diligence, carve-out and merger integration, salesforce effectiveness and margin management. Hall has worked across industry sectors, including manufacturing, industrial, business services and consumer enterprises. 

Lahrkamp has more than two decades of experience working with private equity funds and their portfolio companies. His expertise includes top-line growth and performance improvement for manufacturing, distribution and services companies in a variety of industries. He is also the founder of the A&M Rapid Results Program™.

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