Sustainable Value Improvement (SVI) is a methodology developed by KPMG that takes an “External Investor” approach to a company to try and unlock additional value and typically increase profitability. The SVI methodology starts with a company’s financial statements and payroll data, and drives an unconstrained, unbiased and holistic review of a company’s operations to unlock value through increased efficiencies. Typically, the SVI methodology is used to drive increased profitability. This can be done through cost optimisation, strategic pricing or revenue enhancement.
Findings are based on actual company performance and operations, and backed up by robust analysis; performance is compared against relevant external and internal competitors and not only market benchmarks. Through KPMG’s experience, we found that the following are possible triggers that could result in the SVI methodology being used:
- Need of funds for refinancing – You may need to prove the potential value of an asset to financial institutions in order to gain access to a line of credit.
- Maximising asset sale price – Unlocking additional potential within an asset to increase the proposed sale price via either potential margin improvement or cost reduction.
- Leadership change – Changes in leadership can lead to a change in the strategic direction of a company.
- Increased investor input in daily operations – Investors are beginning to become increasingly more involved in the day-to-day running of a firm. This may lead to a desire for a reduction in operating costs and increased revenue to drive share price and dividends.
- Changes in the operating environment – Uncontrollable factors such as natural disasters and changes in the fundamentals of the economy in which the business operates can lead to a need to optimise the cost structure of a company.
- Costs increasing faster than revenue – Companies usually expand, without much consideration to costs, when economic times are good. However, when the bubble bursts they are left with an inflated cost base.
- Response to a specific competitive challenge – You may require a commercially viable response to a potential market threat to your business.
KPMG has assisted firms in the following industries to unlock value through lowering operating costs, increasing margins, unlocking working capital and freeing up capital expenditure:
- Oil and gas
- Consumer markets
- Pension funds
- Financial services