Private Equity Value Creation Starts on the Shop Floor: Two Case Studies in What the Numbers Look Like with EBITDA Multiple

Private equity value creation comes down to two levers: revenue growth and EBITDA improvement. Everything else, the acquisition thesis, the add-on strategy, the exit timeline, runs through those two numbers.

What’s often underappreciated is how much operational performance drives both. On-time delivery earns customer confidence and creates the conditions for more sales. Productivity improvement reduces cost per unit. Better quality reduces rework and customer escalations. Process improvements free up the support staff that was consumed by blocking and tackling to focus on growth instead.

CBS’s work in private equity consulting isn’t about financial engineering. It’s about going into portfolio companies and building the operational foundation that makes the investment thesis executable. The improvements CBS drives translate directly to EBITDA and through the EBITDA multiple, they translate directly to exit value.

Two case studies make that concrete.

How CBS Approaches Private Equity Consulting

CBS engages with private equity at several points in the investment lifecycle. On the inorganic side, CBS can support due diligence: reviewing the operational state of an acquisition target from the Confidential Information Memorandum through close. CBS can also help existing portfolio companies free up working capital to fund acquisitions, reducing the cash required to execute an add-on strategy.

On the organic side, CBS’s core contribution is operational execution. CBS goes into a business and drives performance improvements that show up on the income statement: improved on-time delivery that supports sales, lower cost per unit that improves margin, better quality improves customer satisfaction and reduces cost, and process improvements that free up capacity without adding headcount.

The relationship between those operational results and EBITDA is direct. And the relationship between EBITDA and exit value, through the multiple, is where the return on operational investment becomes significant.

The EBITDA Multiple and Why Private Equity Value Creation Compounds

Most industrial businesses are valued as a multiple of EBITDA. A company earning $10M at a 7x multiple is worth $70M. If operational improvements increase EBITDA to $15M, that same multiple drives a $105M valuation, a $35M gain from operations alone.

This is what makes private equity operational value creation different. Every dollar of EBITDA improvement is amplified at exit. Consistent, even modest gains compound over the hold period and can materially change the investment’s return profile.

CBS’s engagements are designed to produce that kind of improvement, with the specific KPIs (delivery performance, productivity, overtime reduction, lead time) that translate to EBITDA. Two engagements illustrate what that looks like in practice.

Case Study 1: Doubling Capacity Without Adding Resources

A private equity firm acquired a manufacturer known for its product quality but struggling to scale. The business had been family-owned and carried the common challenges of that transition: limited capital investment, productivity constraints, and a production approach that worked at a certain size but couldn’t support growth.

CBS conducted a full operational assessment from quoting through delivery and cash collection to establish the current state across every element of the business. The output was a phased implementation plan designed for the specific organization.

The work focused on several areas: manufacturing standard work, scheduling, point-of-use material staging, visual management and control systems, and a fundamental redesign of the production flow. The product (large equipment pulled behind vehicles, some large enough to operate on their own track systems) had been built in a job shop environment, where each unit progressed through the facility without a defined sequence or timing.

CBS helped the client move from that job shop model to a station-based build environment, with a defined takt time of approximately two days. Units moved forward through stations on a daily cadence. The production system gave the floor a plan to execute against, and the operating system gave leadership a daily view of whether it was being executed.

The results over the engagement: the client doubled capacity without adding equipment, facilities, or headcount. Lead time dropped by 80%. Overtime, which had been running above 25% of total labor, dropped to less than 5% on average. Productivity of the build process improved by 56%.

The team was also trained to sustain and replicate the system. Following the engagement, they applied the same methodology to additional production lines and product areas on their own.

The downstream impact for the private equity firm was direct. With doubled capacity, the business could support more revenue from the same asset base. With lower labor cost per unit and reduced overtime, margins improved. The PE firm was able to acquire a complementary business and fold it under the same umbrella (accelerating the growth thesis the original acquisition was built on) and ultimately sold the combined business to another private equity firm at a substantially higher multiple.

The operational improvements that drove those outcomes weren’t coincidental. They were the mechanism through which the investment thesis was executed.

Case Study 2: 250% More Volume, Same Operation, Two Years Later

The second engagement was with a distributor of O-rings and value-added kits serving OEM and MRO customers: organizations in industries like oil and gas that require replacement seals, gaskets, and O-rings on a regular maintenance schedule, often needing custom-kitted assemblies delivered quickly.

The business had a structural efficiency problem concentrated in its highest-value segment. Approximately 60% of total order volume was quick-turn business: orders where customers needed rapid fulfillment and where speed was a direct competitive and margin advantage. That segment was also the most constrained, running with high labor cost relative to output and carrying past due orders above 23% of total volume.

CBS engaged for approximately three months alongside the senior leadership team, focusing on rapid assessment, improvement implementation, and capability transfer, leaving the team in a position to continue driving improvements independently after the engagement ended.

In the quick-turn segment specifically, CBS reduced labor by 50% while increasing output by more than 30%. That’s not a marginal improvement in one dimension: it’s a simultaneous reduction in cost and increase in capacity, which together substantially improve the margin profile of the business’s most profitable order type.

Visual management and floor management systems were implemented across operations. Over the three-month engagement, past due orders dropped from above 23% to below 10%.

The more significant data point is what happened after CBS left. Approximately two years after the engagement, the same operation with the same number of people is now servicing more than 250% of the volume it was handling when CBS came in. Past dues remain below 10%, and the remaining past dues trace to supply chain gaps (material that wasn’t anticipated) rather than to operational capacity.

The client took the system CBS helped build and continued improving it. That’s not a common outcome, but it’s the intended one. CBS’s goal in every engagement is to transfer capability, not create dependency.

The Pattern Across Both Engagements

Both case studies reflect the same underlying dynamic. The operational problems in each business weren’t the result of bad people or insufficient effort. They were the result of systems that hadn’t been designed to scale, production approaches that worked at a certain size or under certain conditions but couldn’t support growth without a redesign.

CBS’s role in each case was to assess the current state rigorously, build the operational infrastructure (the production system, the management system, the visual controls) that the business needed to perform at the level the investment required, and transfer the capability to sustain it.

The improvements that followed: doubled capacity, 80% lead time reduction, 56% productivity gain, 50% labor reduction in a constraint area, 250% volume growth over two years, are the operational results that drive EBITDA. And EBITDA drives exit value.

For private equity firms evaluating their portfolio’s operational potential, the question worth asking is straightforward: what is the operational ceiling of this business, and what would it take to get there? CBS has spent decades answering that question, in manufacturing facilities and distribution operations across multiple industries.

If you’re working through that question on a current portfolio company, or evaluating an acquisition target’s operational baseline, we’d welcome the conversation. Let’s connect.