Digital Due Diligence, Value Creation
A leading private equity firm wanted a partner to conduct technology due diligence on a fast-growing mid-sized field service platform company. Our digital goals were twofold: to assess risks and to leverage our data analytics capabilities to identify opportunities to increase revenue and grow EBITDA through targeted implementations of new technology.
By analyzing transactional, operational, and financial data, we were able to develop a prioritized and quantified set of digital opportunities for growing the target’s customer base, expanding lead generation capabilities, and improving labor utilization.
These digital opportunities—underwritten by the private equity in their bid—identified up to $6 million in EBITDA expansion.
potential EBITDA upside
net EBITDA expansion
defined and quantified digital opportunities to be included in value creation planning
We provide technology due diligence in every industry. HVAC field services was atypical, but our client recognized that the analog and labor-intensive nature of field services provided an outsized opportunity to leverage technology to drive revenue growth and EBITDA expansion. Additionally, the target had a handful of partially integrated historical acquisitions with varying technologies and processes in place.
We helped our client analyze the broad array of data that existed in the target’s systems—data which existed in great volume but produced few insights. We then analyzed the data and leveraged our industry experts to build solutions that could both enhance EBITDA and better prepare the company to serve as a platform for future acquisitions. By iterating these solutions and the expected upside with our client, we were able to provide quantified opportunities that our client could leverage in their bid for the business.
Our updated approach to technology due diligence seeks to holistically blend technology, operational, and pieces of commercial due diligence into one view of the business. We find this approach works best with traditionally analog, labor-intensive, and capital-intensive businesses that are behind the curve on technological adoption.
By receiving raw data from these types of businesses, we can quickly analyze and identify opportunities. We completed the engagement with our client in a week—delivering a final diligence report in time for them to factor the findings into their bid. Our due diligence work benefitted our client in two fundamental ways, both:
The approach enabled a more data-driven decision process, strengthening our client’s hand when going into final bids. The data analysis and connection to technology provided visibility into value creation opportunities that were previously unknown.
While building technology recommendations is insightful, it was only valuable to our client in the context of quantifiable financial value. Through the diligence process, we estimated a net EBITDA expansion of 0.9-1.9% (with up to $6 million of annual EBITDA upside) across nine digital initiatives. The client now has a clear vision of the potential upside of digital enhancements and concrete projected EBIDTA numbers to carry into their post-close ownership of the company.