Accelerating the Integration of Low-Volume, High-Mix Production Organizations

Abstract

In private equity, the buy-and-build strategy may be used to perform horizontal acquisitions of targets that operate in the same industry and interact with similar customers and suppliers. This strategy increases the buyer’s market share in the field, diversifies its customer base, provides opportunities for the realization of synergies, and may even add new capabilities to its offerings. The consolidated platform company can then achieve a value that is significantly higher compared to that of the individual portfolio companies alone. This increased value from the combination of portfolio companies, however, is dependent on their successful integration into the platform company.

This research investigates the unique challenges of aligning and integrating two independent production organizations that operate in the low-volume, high-mix (LVHM) metal fabrication sector. The research strategy used in this thesis begins with defining objectives and establishing the initial states of the portfolio companies. Then, a gap analysis and strategic benchmarking are performed to identify integration opportunities. Finally, proposals to accelerate integration in operations are provided: the first proposes increasing automation in production data management, and the second proposes a method to allocate indirect costs and better understand total costs during billing in the quote creation process.

Though time and resource constraints prevented the proposed recommendations from being implemented during this research period, these recommendations have the potential for substantial positive impact on both platform and portfolio company operations. While the proposals are tailored to the organizations studied in this research, the broader concepts on which they are based suggest wider applicability to similar LVHM production environments. This thesis offers a framework for organizations to assess their initial and goal states, define objectives, and develop strategies to accelerate integration.