Case Thinking

Question 1

Ways to Cut Costs - Finance Related

Answer 1

\+Have customers pay sooner
\+Refinance Debt
\+Sell non-essential assets
\+Hedge currency risk
\+Redesign health insurance

Question 2

Ways to Cut Costs - Production Related

Answer 2

\+Invest in Technology
\+Consolidate production space to gain scale and accountability
\+Create Flexible production lines
\+Reduce Inventories (JIT)
\+Outsource
\+Renegotiate with suppliers
\+Consolidate supliers
\+Import parts

Question 3

Ways to Cut Costs - Labor

Answer 3

+Cut overtime
+Reduce employer 401K Match
+Raise employee contribution to HC program
+Convert workers to owners
+Contemplate layoffs
+Institute across the board pay decreases

Question 4

What are LBO Value Drivers?

Answer 4

1) Delevering
2) EBITDA Growth (assuming entry = exit multiple)
3) Multiple Expansion (multiples dictated by market

Question 5

What can a company do with excess cash?

Answer 5

1) Delever
2) Dividends to Sponsors
3) Organic Growth, capex
4) Inorganic Growth - acquisitions
5) Fill Balance sheet or debt service reserve