CASE STUDY
Supply Chain Finance Execution
Increased Buyer DPO, Reduced Supplier DSO, Thus Improving Cash Flow For Both Counterparties
A private equity-owned manufacturing company wanted to implement a Supply Chain Finance (“SCF”) program. In this SCF program, the manufacturing company was granted an extension to their Days Payable Outstanding (“DPO”), freeing up working capital that was reinvested back into their business for various growth initiatives.
At the same time, the FinTech company, dedicated to SCF programs, offered its digitized SCF platform to the Company and arranged the capital from various third-party credit-oriented asset management firms to pay the suppliers immediately on all their approved invoices. Without the use of incremental debt by the Company, this “win-win” program significantly increased cash flow at the manufacturing company while providing immediate liquidity, on a non-recourse basis, to all their suppliers. We were engaged to identify the FinTech company dedicated to SCF programs
The Execution
We conducted a thorough underwriting process for the manufacturing company.
Financial Statement Analysis – Income Statement, Balance Sheet, Cash Flow Statement, leverage, interest coverage, etc. analysis to determine if the private credit funds would underwrite the credit profile of the manufacturing company and the appropriate discount/price to be charged to their suppliers for immediate payment on their invoices.
Vendor Spend File Analysis – Based on the manufacturing company’s list of suppliers, the payable amounts to each supplier, and the current Days DPO per supplier, we made recommendations on the DPO extension per supplier and how the teams within the offices of CFO, Procurement, and IT should work together for quick, efficient and successful implementation of their SCF program.
Syndication to Third-Party Credit-Oriented Asset Management Firms – Arranged meetings with numerous private credit funds to allow them to conduct their underwriting due diligence on the manufacturing company.
The Results
We secured multiple credit-oriented investors at low discounts/prices offered to all the suppliers. Supplier opt-in for
immediate payment at the low discount/price was large; therefore, the manufacturing company was granted a
meaningful extension to their DPO. Cash flow and profitability increased significantly at the manufacturing company,
without the use of debt, while suppliers reduced their Days Sales Outstanding (“DSO”).
Industry
— Auto Parts Manufacturing
Duration
— 4 Weeks
Team
— 1 Managing Director
— 1 Vice President
Services
—Supply Chain Finance Advisory
— Vendor Spend Analysis
— Investor Syndication
