Due diligence as a success factor: How procurement & supply chain ensure sustainable growth in private equity transactions

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In private equity transactions, sustainable growth is no coincidence, but

the result of targeted analysis and consistent management. Professional due diligence in the area of procurement and supply chain forms the basis for long-term corporate success.

It goes far beyond simply checking figures: it creates transparency, uncovers risks and identifies potential for increasing efficiency and optimizing costs. Especially in the dynamic environment of private equity, where companies often pursue ambitious growth targets and strive for rapid increases in value, a structured view of the procurement and supply chain processes is indispensable.

Strengthening resilience, promoting innovation: focus on supplier management

The takeover of a medium-sized mechanical engineering company by a private equity company provides an illustrative example. The supplier portfolio was systematically analyzed as part of the due diligence process.

The study showed that the company purchases around 60% of its purchasing volume from just three main suppliers. concentrated. In the past, this led to production stoppages in the event of supply bottlenecks. production stoppageswhich annual costs amounting to around 1.2 million euros per year.

The targeted diversification of the supplier base - the number of strategic suppliers was increased from 3 to 7 within 18 months - and the establishment of new partnerships enabled the company to significantly increase its resilience. The result: a reduction in failure-related costs by over 70 % and and an improved negotiating positionwhich is reflected in an average 5 % better purchasing conditions better purchasing conditions.

Eliminate inefficiencies, unleash potential: This is what due diligence does

Another key aspect of due diligence is the analysis of cost structures. It is important to look not only at purchase prices, but also at all process costs along the value chain. Modern data analysis and business intelligence tools help to identify hidden cost drivers - such as inefficient warehousing or manual process steps.

In the above example example, the introduction of digital ordering processes and the centralization of purchasing led to a reduction in process costs were reduced by around 18 %. could be reduced. At the same time, employees were specifically trained to use the new processes efficiently. The result: a significant increase in efficiency and a lasting increase in competitiveness.

Next Level Purchasing & Supply Chain: questioning structures, sharpening roles, promoting innovation

An often underestimated success factor in the private equity context is the underlying organizational model of purchasing and the supply chain. The way in which tasks, responsibilities and processes are structured is crucial to the efficiency, speed and adaptability of a company.

Especially in portfolio companies that have been created through acquisitions or rapid growth, historically evolved structures are often found, with decentralized responsibilities, unclear interfaces and redundant processes. This constellation not only entails hidden costs, but also makes it difficult to implement strategic initiatives and exploit synergies.

A targeted review of the organizational model as part of the due diligence creates transparency regarding existing role profiles - from operational and strategic functions to the management level in purchasing & supply chain.

The aim is to clearly assign tasks, bundle responsibilities and design interfaces consistently. The introduction of a central purchasing organization, supported by digital tools, can achieve considerable efficiency gains.

Centralization works: reduce complexity, create clarity

A concrete example is provided by an internationally active production company which, following several acquisitions, had ten independent purchasing departments in Europe. The result: different supplier contracts, inconsistent standards and a considerable amount of additional coordination work. As part of a structured analysis, all role profiles and process flows were recorded.

The introduction of a central purchasing organization with clearly defined roles - for example for strategic procurement, supplier management and operational order processing - has led to a reduction in the number of suppliers by number of suppliers was reduced by 35%. suppliers by 35%. At the same time, purchasing volumes were bundled, resulting in price advantages of 7% on average. on average.

The changeover was accompanied by targeted training for employees. New role profiles were created, for example for data analysts, who monitored all relevant key performance indicators (KPIs) in real time.

Through the introduction of a supply chain control towerwhich digitally mapped all goods flows, throughput times were throughput times by 22% and and significantly increased the transparency of stocks and delivery dates.

Exemplary role profiles in the optimized organizational model:

- Strategic purchasers:

Responsible for the development and implementation of procurement strategies & product group management, price negotiations and contract management

- Operational purchasers and dispatchers:

Management of day-to-day business, order processing and monitoring of delivery dates

- Supply chain managers:

Coordination of the entire value chain, identification of optimization potential and management of transformation processes

- data analysts:

Analysis of output volume, performance and KPIs for continuous improvement

- Supplier Relationship Managers:

Establishing and maintaining strategic partnerships with suppliers

The result: the company achieved savings of around 8 million euros within two years, increased delivery reliability to over 97% and significantly improved its ability to respond to market changes. Employees benefited from clear responsibilities, improved development opportunities and greater involvement in strategic initiatives.

Sustainability and ESG criteria as a success factor

Sustainability aspects and ESG criteria (environmental, social, governance) are increasingly firmly anchored in processes. Companies that take environmental standards, social responsibility and good corporate governance into account as early as the analysis stage not only create transparency for investors, but also position themselves strategically for future requirements.

An example from the consumer goods industry shows how a private equity investor has focused on sustainable procurement strategies: by by introducing ESG standards at over 80% of its suppliers and and implementing a digital monitoring system not only minimized regulatory risks, but also opened up new market opportunities. Within two years, the proportion of sustainable products in the portfolio rose by 25 - with measurably positive effects on brand perception and sales growth.

Managing risks with a clear view, growing sustainably

With structured due diligence in procurement and the supply chain, you can identify risks at an early stage and take proactive and targeted action to counteract them - from supplier dependencies to regulatory or geopolitical challenges.

Digital tools and data-based analyses give you a clear overview in real time so that you can react flexibly to changes and strengthen your company's resilience.

Particularly in the case of M&A transactions, a sound risk assessment provides you with a solid basis for decision-making and avoids unexpected burdens in the portfolio.

Take advantage of the opportunities offered by professional due diligence:

Create transparency, drive innovation and strengthen your company through modern structures and the consistent integration of ESG criteria. This will help you position yourself successfully on the market in the long term.

Would you like to find out how to optimally secure your portfolio and make it fit for the future? ERIKESLY Advisory & Consulting will be happy to accompany you on this journey. Ensure sustainable success - we look forward to exchanging ideas with you.