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Leveraged Sourcing Services

Alvarez & Marsal's dedicated Global Private Equity Services group works with investors and their portfolio companies to provide independent analysis and end-to-end services across the investment lifecycle that deliver results in every economic cycle.

A&M's Private Equity Services professionals leverage the firm's operational heritage and world-class finance, accounting and business consulting expertise, and the experience of its financial, operational and transaction tax diligence professionals in a one-of-a-kind, integrated approach to best serve clients.

Traditionally, private equity firms have managed portfolio companies as individual, stand-alone assets or as sector-based platforms, rather than as a true "portfolio" of investments. This emphasis may be the result of a "hands-off" management philosophy or simply due to sharper focus in other areas.

Regardless of their motivation, many PE owners miss a significant opportunity to increase bottom-line performance by harnessing synergies from the combined purchasing power of their investment portfolios.

By aggregating spend in common indirect, non-cost-of-goods-sold spend categories, a private equity firm can negotiate better deals for its entire portfolio on credit card fees, insurance, packaging, shipping, telecom, office and MRO supplies, computers and travel. These efforts have been shown to rapidly increase cash flow across the portfolio, without disrupting the underlying operations or hampering divestiture efforts of the participating portfolio companies.

Ultimately, the strengthened cash flow are a precursor to improved operating income and increased exit multiples. While leveraging such procurement synergies helps drive higher returns across the portfolio, an additional realized benefit is the ability to foster a higher level of efficiency and effectiveness throughout the collective organization. Ultimately, these operational improvements can make investments much more attractive to potential buyers.

Our Leveraged Sourcing Services include:

• Identify purchasing trends, product and service commonalities and marketplace value drivers
• Leverage similar purchasing patterns and overall scale across portfolio companies
• Use industry insight to better understand current market conditions, supplier strategies and potential opportunities for savings
• Facilitate the end-to-end sourcing process from which portfolio companies continue to benefit post-separation from the private equity parent
• Create value through the sharing of improved purchasing techniques

In addition, the benefits of implementing a Leveraged Sourcing program are quickly apparent and quantifiable. A&M's Leveraged Sourcing Services:

• Are scalable, portable and produce recurring income.
  Leveraged Sourcing is a low-risk, self-funding investment. New acquisitions gain instant "access" to contracts, with savings that are often recurring, fall directly to the bottom line and are typically transferrable.
• Work quickly.
  Savings generally begin to be accrued immediately after new supply agreements are implemented, typically within 120 days of engagement kick-off.
• Incur minimal (if any) operational disruptions.
  With an externally driven process—from spend database development to preparing for execution—Leveraged Sourcing achieves a significant return on investment with a low "emotional quotient," since savings are often found in indirect, non-strategic spend categories.