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Case Study

Broader market plus tighter sales strategy equals big success for a portfolio company

With Bain advising, a mid-market private equity firm with an aggressive timeline acquired a global specialty chemical coating company and sought to grow the business organically. Bain helped prioritize opportunities and hone the company’s go-to-market strategy, putting its money where its mouth was by accepting equity in lieu of fees. Less than three years later impressive earnings growth helped the private equity firm realize more than six times the equity capital invested through a sale.

  • min read

At a Glance

  • 6x return on invested capital
  • 2x EBITDA in less than 3 years

The Full Story

The Situation

CoatingCo* provides a specialized chemical coating for medical devices and electronic components that makes them function better and last longer. The US-based company generated only about $40 million annually in sales at the time of acquisition, but the private equity firm saw substantial growth potential for the size of the market and for CoatingCo.

The big question: Which way to go first? Existing customers could provide additional business, but new customer segments beckoned as well. With many ideas and an aggressive timeframe, the private equity owner turned to Bain for help evaluating current and future organic growth opportunities.

Our Approach

To maximize growth in a short time, CoatingCo needed to start with the basics. Bain took a number of steps to help management and owners clarify the company's core market, estimate the size of that market, and assess which adjacent opportunities might be most fruitful.

Among the key stages:
  • Conduct a two-day workshop with the management team around "profit from the core" concepts to identify opportunities with greatest potential; build alignment around four core growth opportunities and agree on a path to crystalize the four priorities
  • For each opportunity, research market and interview customers to understand substitutes used by customers and to map the sales cycle and process; size up the revenue and earnings potential; develop category strategies and detailed priority account plans
  • Interview sales and marketing team to understand the current sales process and identify opportunities to improve the go-to-market strategy and resources
  • Investigate opportunities in new geographies, including China

Our Recommendations

Focus on four high-potential opportunities:
  • Capture the full potential within two existing markets (surgical tools and stents)
  • Expand sales in the automotive sensor market
  • Pursue emerging opportunities in electrostimulation
  • Refine go-to-market approach
  • Add sales managers, product managers and customer service reps
  • Strengthen compensation plans to match heightened expectations of these functions
  • Implement new tools to manage sales, including an opportunity-tracking database and a dashboard to show account statuses

The Results

  • Doubled EBITDA in less than three years
  • Created a more robust sales and customer service function to support growth for years to come
  • Sold to a strategic buyer within 2.5 years, earning over 6X return on invested capital and in excess of 100% IRR

 

* We take our clients' confidentiality seriously. While we've changed their names, the results are real. 

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