How to Increase & Improve EBITDA Growth for PE Firms

EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. Business, financial, money investment profit concept. Hand placed wooden cube with focused"EBITDA" text and increasing graph.

In most private equity acquisitions, closing the deal is relatively straightforward.

The hard part comes when combining two (or more) entities and attempting to leverage the synergies as planned in the investment strategy.

Things are rarely as simple as they might seem.

The first article in this series discussed how private equity firms can lay the groundwork for a successful post-acquisition integration and enterprise resource management (ERP) implementation.

The next phase involves careful stewardship of the implementation process to drive EBITDA growth as quickly as possible.

What is EBITDA?

EBITDA stands for “Earnings before interest, taxes, depreciation, and amortization” and is widely used to measure the corporate profitability of a business.

It’s vital to ensure that your ERP implementation delivers the efficiencies and market advantages expected by your investors.

3 Ways to Improve EBITDA Growth in Post-Acquisition Organizations:

  1. Automate manual processes
  2. Integrate systems
  3. Streamline reporting

1. Automate manual processes after an acquisition

As organizations scale, manual processes become increasingly burdensome.

If you are looking to triple growth over the next three years, maintaining human-intensive processes will soon become untenable. Instead, look to automate manual processes with your chosen ERP.

Automating workflows for a variety of processes can greatly reduce the administrative overhead, so you can drop more to the bottom line.

Keep in mind that internal processes usually evolve organically, and are highly reflective of people and their experiences. Some processes may not make sense to an outside observer.

As we mentioned before when discussing post acquisition strategy around integration, it’s best to start by discovering how a certain process evolved (and why), then clarifying the underlying requirements the process seeks to fulfill.

Once you truly understand what is needed, you can utilize the automated workflow capabilities of your ERP to make each process more efficient and effective.

How Bridgepoint helps companies automate manual processes:

Bridgepoint recently assisted in a roll-up of five enterprise software companies, each with different processes for procurement, billing, order processing and revenue recognition.

Many of those processes were heavily manual. Leveraging the core capabilities of their cloud ERP, we were able to move the organizations to a single set of automated processes across all business units — within about eight months.

2. Integrate systems after an acquisition

As organizations grow, they tend to acquire point solutions for sales, financial management, warehouse management, e-commerce and other systems as needed.

Few of these systems, if any, are integrated with each other in any meaningful way. They are generally glued together by people moving data from system to system, reconciling the data manually.

Integrating these systems with an ERP is critical to achieve efficiency and drive EBITDA growth.

However, integration is also complex and expensive. Initial integration efforts should be focused on high volume, manually intensive operations.

For instance, an e-commerce company may want to focus on integrating their website to their financial system, but a distribution company may want to focus on integrating their warehouse management system to the financial system.

To make the most of their ERP’s powerful capabilities and maximize efficiency, companies should ultimately work toward complete integration of all high-volume business systems.

How Bridgepoint helps companies integrate better systems:

Not long ago, the Bridgepoint team worked with a manufacturing and service company that provides security devices to retail and banking organizations across the country.

Prior to our engagement, the company employed highly manual processes for billing, inventory tracking and field service management.

Through their ERP implementation, we were able to deliver a fully integrated system that enables real-time inventory visibility without manual intervention — from the time of manufacture through deployment to the field service truck, and ultimately to installation at the customer location.

The ERP ensures data integrity throughout the manufacturing process, saves considerable time and duplicate effort, and ultimately provide better data to improve customer service.

3. Streamline reporting after an acquisition

Organizations often spend a great deal of time shuffling data between systems, spreadsheets and presentation tools to create impressive-looking reports for management.

These are manual processes that can be eliminated during ERP implementation, freeing up your administrative team to focus on running the business.

The closing process is a perfect place to start. Begin by looking at your reporting needs and making sure that the data required to generate those reports is captured by your ERP solution.

Next, integrate your ERP with a cloud-based solution (e.g. Tableau or Adaptive Insights are industry leading options) to create dashboards and reports as needed.

These cloud solutions give your management team 24/7 access to reports and dashboards using real-time data straight from your internal systems.

By integrating these systems, you eliminate the manual effort involved in creating ad hoc reports. You also eliminate the potential for human error. This not only saves time and money — it can also vastly improve decision-making.

How Bridgepoint helps companies streamline reporting:

One of our clients is an e-commerce precious metal dealer working in fast-moving commodity markets.

With transactions and pricing changes happening 24/7, company management desperately needed accurate real-time reporting.

Bridgepoint integrated the company’s phone, e-commerce, customer management and financial management systems to a single ERP solution.

Company management now has instantaneous reporting as transactions occur, easily visible on the call center wall through an integrated data visualization tool.

Final Thoughts on Speeding Up EBIDTA Growth Post-acquisition

Unfortunately, many post-acquisition organizations fail to achieve the objectives of their investment thesis during the ERP implementation process.

When we look under the hood, we usually find that these companies did not adequately set the stage for integration or that their implementation efforts were hampered by a lack of focus and direction.

Organizations that align ERP implementation to focus on automating manual processes, integrating disparate systems and streamlining reporting will be far more successful in facilitating revenue growth and driving EBITDA.

Need Post-acquisition Support?

The Bridgepoint team is proud to partner with private equity firms to successfully navigate post-acquisition integration, ensure successful ERP implementation, and ultimately drive EBITDA across a growing portfolio. Our experienced consultants are ready to support you with a full suite of private equity advisory services — including finance and technology transformation, operational improvement, and ERP implementation and systems integration.