Working Capital Efficiency
Putting Working Capital to Work
Working capital improvement isn’t the marquis stuff. It’s not the stuff that earnings or operating profit are made of. And yet, it can be the unsung hero of a successful private equity exit. When decreased, working capital can deleverage the business and increase equity value. It can improve forecasting, hasten EBITDA growth and increase valuation. Reducing a company’s net working capital cycle can unlock billions in cash flow. When portfolio company performance is at or near plan, that freed up cash can be reinvested in value creation activities (making it the proverbial icing on the cake). But when performance hasn’t met expectations, working capital improvement can be a transformative step toward restoring investor confidence. At Accordion, we help put working capital to work.
The Accordion Approach to Working Capital Improvement
The S Factor
Working capital improvements are best when they follow the hard to achieve, but impossible to ignore, S-rule: they’re Stable, Sustainable and Sizeable. At Accordion, our focus is on creating a process for the continuous optimization of working capital. In doing so we avoid that other attractive, but ultimately destructive, S factor – Single-point-in-time reductions that do little to benefit the company or its investors.
De-debt to De-risk
Reducing working capital intensity provides an alternative avenue of cash to feed growth – one that is available outside of the debt markets. By helping our clients reduce inventory levels or improve collection cycles for receivables, Accordion helps optimize capital – insulating the company from sales fluctuations or supplier variables that would otherwise more negatively impact performance.
Single Source of Truth
Disparate reporting systems, sub-par technology solutions, limited access to real-time data, superficial assessments and multiple stakeholders make the accurate evaluation of working capital nearly impossible. Accordion not only defines a single source of truth for working capital management, but creates a process-led approach toward organizing data on a granular level, capturing and then capitalizing on incremental improvements. In other words, we help create a working structure for working capital.
Private Equity Practitioners
All working capital is not created equal. Working capital within a public company context is a much different animal to the working capital optimization benefits in a private equity environment. And, it’s a much different animal to the disadvantages of debt caused by ineffective capital optimization. We’re not only experienced practitioners, but we’re experienced where it counts: in the PE world. We understand working capital’s importance and application to your portfolio investments and we uniquely understand how to implement improvements within this context.
Working capital management is an indicator of a company’s operational strengths. Those that do it well, often have strong financial health and find success.