These are challenging economic times for the deal market as well as the overall economy. Protracted softness in the economy, at this point, has affected most sectors. Recent events in the financial markets combined with the economy’s impact on leveraged company performance have created an environment where lenders are either unable or unwilling to be as active and companies may well be tripping loan covenants. Similarly, corporate management and financial sponsors who own portfolio companies are more focused on optimizing operating performance for both offensive and defensive benefit. Given this, we wanted to share some of the ways IGS has helped companies improve their performance or grow their business outside of the transaction environment.
Strategic Support and Industry Assessments
Whether seeking to extend a strong position or retrench in the most viable segments, companies are facing a high degree of uncertainty and change in their marketplaces today. As in previous economic cycles, IGS is seeing an increase in work with corporations and portfolio companies to tackle issues unrelated to transactions. We would be happy to discuss in greater detail the ways in which IGS may be able to assist you and your business. A few examples of the variety of key issues we can address and some situations in which we’ve addressed them follow.
Key Issues Addressed:
- Threat of technology driven in-housing
- Off-shore competition
- Predictive spending model
A portfolio company was looking at investing to grow its business but faced significant uncertainty regarding the role of technology and off shore manufacturers and whether each was a threat or an opportunity. The company was also unsure if it was maximizing its existing relationships. IGS clarified dynamics occurring in technology and off shore manufacturing by interviewing dental practitioners and company competitors nationwide. IGS quantified penetration trajectories and limitations for a competitive technology as well as identified the actual source of growth for demand of off shore products. This helped management gain a clearer understanding of the extent, timing, and impact of these critical factors. Finally, IGS developed a predictive spending model for the company’s sales force to use when calling on clients and prospects to gauge likely account revenue.
Specialty Food Example
Key Issues Addressed:
- Addressable market size and growth
- Penetration Dynamics
- Channel-specific market share
- Redefining target market
A corporate specialty foods client facing pressure from an overseas parent to hit higher growth targets wanted to understand the available market for its products, and which segments it should focus on for increased growth. IGS characterized the overall market and, through segment specific analysis, showed that the business was already significantly outpacing overall segment growth in its target market. Further, IGS analysis indicated that the client already held material share of its market in both the retail and foodservice channels based on current and expected penetration dynamics of specialty food against the broader food category. Finally IGS highlighted areas for expansion such as new products and broadening the company’s market definition of its target market.
Specialty Components Example
Key Issues Addressed:
- Qualifying potential sales leads and new accounts
- Sales force alignment and optimization
A portfolio company facing market saturation in its core market verticals and geographies was considering sales force expansion, but needed a quantified approach to understand where to deploy resources and what type of returns could be expected. IGS identified market opportunities for a specialty components manufacturer by speaking with manufacturing engineers at design and manufacturing centers across the country. IGS spoke with individuals in the aerospace, medical device, automotive, appliances, heavy machinery, and computers and peripherals industries to verify component sourcing and spending trends as well as to identify potential “likely” sales targets for the client. Subsequently, IGS developed a geographic and industry specific sales force placement strategy in order to most effectively address these potential market opportunities. The final output included a ranked list of geographies in which to place new sales personnel, and included names, titles and contact information for potential new customers in each industry.
Consumer Products Retail Example
Key Issues Addressed:
- Debt investment
- Real-time sale and inventory trends
- Sales mix and average ticket trends
A client was contemplating an investment in the public debt of a privately held national consumer products retailer. Because of a lack of public information regarding quarterly performance and trends, this client needed a detailed quarter by quarter understanding of sales, inventory, and average purchase changes and trends. IGS evaluated trends in current sales, discounting, and inventory changes of the retailer, as well as views on underlying driver trends (e.g., mall traffic, consumer lifestyle trends, tween celebrities, etc.) by interviewing managers and assistant managers at retailer locations across the country. Additionally, interviews were conducted with retail competitors and debt / equity Wall Street analysts that cover companies in the consumer retail space. Period sales compared to prior year as well as inventory changes were explored. Other key issues evaluated included sales mix, the recent health of major competitors and the overall health of the retail market.
In response to the service needs of its private equity clients, Investor Group Services was developed in 1996 as a practice area within The Parthenon Group, a strategy consulting firm based in Boston, MA. In 1998, Investor Group Services LLC (IGS) spun out of the Parthenon Group. In December 2000, Ernst & Young, LLP (EY) made a control investment in IGS and subsequently acquired full ownership of the company. In June of 2006, IGS separated from EY and is an independent company owned by its principals.
IGS provides three core services to private equity and corporate clients:
- Strategic Support: helps clients to evaluate market trends and opportunities to define strategic goals, to choose among strategic alternatives, and/or to clarify an existing strategy.
- Industry Assessments: help clients that have an interest in a particular industry to evaluate whether a potential market or industry (or segment), are more or less attractive, and what opportunities or threats might exist, e.g., industry consolidation, obsolescence, pending regulation…
- Buy-side and Sell-side Market Due Diligence: provides clients with critical market information and insight on key market and strategic issues regarding a transaction; e.g., the potential size of a market opportunity, how customers view a target company versus competitors, the impact of a market recession, which segments of the market will experience the highest growth…
Should you have an interest in learning more about IGS, our services and experience, please feel free to call: Mindy Berman - (617) 371-4002 Rob Lordi - (617) 371-4029 Ashley Shih - (617) 371-4004 Ken Beausang - (617) 371-4035 Pat Donahue - (617) 371-4010 Jenn O’Hara - (617) 371-4062 Amit Rao - (617) 371-4042 Bill Sones - (617) 371-4036