Developed management reporting model for PE-backed equipment manufacturer

Developed management reporting model for PE-backed equipment manufacturer

Stout developed a complex management reporting model for a middle-market private equity (PE) portfolio company specializing in equipment manufacturing (the “Company”).

The Company’s PE sponsor, and other key stakeholders, anticipated a need to derive more granular financial data as the Company prepared for a potential strategic sale transaction. As such, the Company desired to produce fully burdened gross profit margins across several thousands of stock keeping unit (SKU) line data.

The Company had no established overhead allocation methodology in place, and the financial information necessary to perform this analysis was spread across five disparate enterprise resource planning (ERP) systems, several regions, and other inconsistent data sets. To that end, Stout was engaged, at the behest of the PE sponsor, to develop a complex management reporting model that would offer new and robust insight into the Company’s gross profit margins at a granular sub-product level.

Stout worked with the Company’s CFO and Global Controller to create a consolidated mapping system that linked ERP-generated data from each legal entity to dissimilar data sets to provide recurring thorough information in a streamlined go-forward approach. After crafting a passageway to link the data between the disparate systems, Stout worked closely with the relevant management personnel to develop an overhead allocation methodology, using a hybrid standard cost approach, that would accurately allocate overhead across multiple product categories and at the SKU level.

Once the initial draft of the model was complete, Stout led and facilitated discussions with the PE sponsor to align on the derived cost allocation methodologies and generated results, and Stout incorporated any suggested feedback into the model. Finally, Stout effectively transitioned the model internally to the Company’s newly hired Financial Planning and Analysis (FP&A) team.

As a result of the work conducted by Stout, the Company can provide relevant and necessary data to the PE sponsor and/or a potential buyer and utilize the gross profit margin model to analyze key components of the Company’s operational model.