casemark/building-value-creation-plans

Building Value Creation Plans

When To Use

• Post-close 100-day planning for newly acquired portfolio companies
• Annual or mid-year operating plan refresh with the operating partner team
• Preparing for LPAC meetings or operating partner reviews requiring initiative-level detail
• Transitioning from deal underwriting to execution — bridging the gap between investment thesis and operational reality
• Growth equity investments needing structured scaling roadmaps tied to milestones

Inputs To Gather

• Investment thesis and underwriting model — the original revenue, EBITDA, and multiple-expansion assumptions that underwrote the deal
• Historical financials — trailing 3 years of P&L, balance sheet, and cash flow; segment-level detail where available
• Quality of earnings (QoE) report — adjusted EBITDA bridges, non-recurring items, and normalized run-rate
• Management interviews or operating due diligence findings — known bottlenecks, talent gaps, systems limitations
• Industry benchmarks — margin profiles, revenue-per-employee, working capital days for comparable companies
• Existing strategic plan (if any) from the management team pre-acquisition
• Debt covenants and capital structure — leverage ratio limits, restricted payment baskets, capex constraints that bound the plan

Workflow

1. Map the underwriting bridge to initiative categories. Decompose the underwritten equity return into three value creation levers: revenue growth, margin improvement, and multiple expansion. Assign each underwriting assumption to a concrete initiative bucket (e.g., "price optimization +200 bps gross margin" rather than "margin improvement").

2. Build the 100-day plan. Identify 8-15 quick-win initiatives achievable within the first 100 days post-close. For each initiative, specify:

   • Owner (name and title, not just "management")
   • Quantified EBITDA or cash flow impact with timing
   • Dependencies and sequencing (e.g., ERP migration blocks procurement savings)
   • KPIs to track weekly or bi-weekly during the 100-day sprint

3. Structure the long-term value creation plan (Years 1-5). Organize initiatives across three pillars:

   • Revenue growth — organic (pricing, cross-sell, geographic expansion, new products) vs. inorganic (tuck-in M&A pipeline, platform strategy)
   • Margin improvement — COGS reduction (procurement, manufacturing efficiency, supply chain), SG&A optimization (headcount rationalization, shared services, facility consolidation), technology enablement
   • Capital efficiency — working capital optimization (DSO/DIO/DPO targets), capex discipline, asset-light model transitions, debt paydown and refinancing timing

4. Quantify each initiative. Build a bottoms-up bridge from current-state EBITDA to target-state EBITDA. Each initiative should carry:

   • Base case, upside case, and downside case impact
   • Implementation cost and one-time charges
   • Probability weighting (high confidence vs. stretch)
   • Timeline with milestones (not just "Year 2")

5. Stress-test against constraints. Validate that the aggregate plan is feasible given:

   • Management bandwidth — avoid overloading the team with 30+ simultaneous initiatives
   • Capital structure — confirm capex and acquisition spend fits within covenant headroom [VERIFY covenants in credit agreement]
   • Market conditions — sensitivity to volume, pricing, and input cost assumptions

6. Build the tracking and governance framework. Define:

   • Monthly operating review cadence and reporting template
   • Initiative scorecards with red/yellow/green status
   • Escalation triggers (e.g., initiative >60 days behind plan → board-level review)
   • Accountability mapping between operating partners, management, and functional advisors

Output

The value creation plan should include:

• Executive summary — 1-page view showing entry EBITDA, target exit EBITDA, and the initiative bridge between them
• 100-day plan — tabular format with initiative name, owner, impact ($), status, and key milestones
• Long-term initiative detail — one page per major initiative covering rationale, financial impact, implementation steps, risks, and KPIs
• EBITDA bridge waterfall — visual bridge from current to projected EBITDA, broken out by initiative category
• Sensitivity table — showing total value creation under bull/base/bear scenarios across key assumptions (revenue growth rate, margin capture, exit multiple)
• Governance calendar — operating review schedule, board reporting dates, and LP communication milestones

Quality Checks

• Every dollar of underwritten value creation maps to at least one named initiative — no unexplained gaps between thesis and plan
• Initiative-level impacts sum to within 5% of the aggregate EBITDA bridge (reconcile rounding and overlap)
• No initiative lacks a named owner — "TBD" owners signal execution risk that must be flagged
• 100-day initiatives are genuinely achievable in 100 days — validate against implementation timelines for comparable portfolio companies
• Capital expenditure and acquisition assumptions fit within debt covenant baskets [VERIFY against credit agreement restricted payments and capex covenants]
• Working capital assumptions align with QoE adjustments and historical seasonal patterns
• Revenue growth assumptions are cross-checked against TAM analysis and management's pipeline data [VERIFY market sizing sources]
• Plan does not double-count savings (e.g., headcount reduction claimed in both SG&A optimization and shared services consolidation)