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Recent Stranded Cost Analysis experience


Stranded Cost Analysis

Parent may be left with a disproportionate cost structure after sale.

Client challenges

  • Negative economies of scale result in higher costs for the parent
  • Post carve-out, the parent’s fixed overhead cost are shared over fewer business units
  • Business unit heads are taken by surprise when they get charged higher management costs
  • Direct negative EBITDA impact post closing

How we can help

  • We help negotiate with suppliers to minimize the impact of lower economies of scale
  • we calculate the impact of stranded costs, and enter in into the communication to the Market
  • We calculate the impact on the recharges to the remaining business units
  • We include the stranded costs in the parent’s KPI’s, budgets and forecasts

Key benefits

  • negotiate with suppliers from a stronger pre-deal position
  • no negative surprises in communication to the Market
  • KPI’s, budgets and forecasts are adjusted to reflect the changes in overhead and supplier costs

Lessons learnt

  • Faced with the need for cost reduction, management commonly fails at execution
  • Inability to deal with competing priorities during a time of transition
  • insufficient resources to execute
  • failure to follow through tends to plague parent in its bid to avoid saddling unnecessary costs
  • Parents can take 1 to 3 years to recover EBITDA%

GPMIP Contact us
GPMIP UK Contact Andrew
GPMIP Sweden Contact Michael
GPMIP USA Contact Scott & Stefan
GPMIP Belgium Contact Christophe
GPMIP France Contact Gilles
GPMIP China Contact Robert
GPMIP USA Contact Scott
GPMIP Italy Contact Sergio
GPMIP USA Contact Stefan
GPMIP France Contact Orlane
GPMIP Canada Contact Sue