Alvarez and Marsal

Cost Optimization

Helping Companies Change How They Operate to Re-Set the Cost Structure

Private equity investors often find themselves in situations where portfolio companies need to realize meaningful and sustainable improvements in cost structure. Companies in these situations cannot simply cut their way to efficiency – they need to change how they operate to re-set the cost structure.

Getting the right cost structure in place today is a “no regrets” decision. If the top-line dips, the business can take it. And, if the top-line grows, the more efficient cost structure will deliver increased profitability, and growth will be accretive to the platform. A&M PEPI’s Cost Optimization service offering is a proven solution for delivering meaningful, step-change improvements in cost structure.

A&M’s Cost Optimization delivers substantial improvements for portfolio companies in these situations, and consistently strong return on consulting for our private equity clients.

Margin and Cost Transparency

Margin and Cost Transparency
  • Current margin profiles and breakdown of labor and non-labor costs must be clearly understood via transparent baseline

Complexity Reduction

Complexity Reduction
  • Reducing complexity in the business provides a clear trigger for simplifying the organization and cost structure

Organizational Restructuring

Organizational Restructuring
  • Headcount reductions under current structure are not sufficient when the organization needs to change, not just cut

Support Function Efficiency

Support Function Efficiency
  • Streamlined organizations typically requires less support to operate, e.g., back office and other similar functions

Non-Labor Spending

Non-Labor Spending
  • Non-labor cost reductions provide near-term cash and EBITDA lift without impacting headcount

Case Study

Case Study

CLIENT

$1B

Industrial Fibers Company

Over 20 years of year-over-year revenue increases and growing at all costs, the company experienced a significant economic slowdown in their specific markets.

ROLE

  • Developed scalable platforms across major lines of business
  • Simplified the organization structure with a focus on efficiency and accountability
  • Overhauled sales force to optimize staffing levels, and incentivized sales to balance volume and contribution margin

IMPACT

30%

EBITDA improvement

Successful sale of the business

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