Wyndham has developed its own turn-key, value-added program for
reducing risks and costs, increasing efficiencies and maintaining
controls: it has created an internal Service Company to arrange for each
of its portfolio companies
- To have access to low-cost, flexible, U.S.-based financing
- To secure additional orders, particularly from existing customers
- To reduce cost of goods sold prior to closing transactions, and
- To install and then handle up-to-date MIS reporting systems and other controls.
This increases both the sales and the profitability of each company.
By aggregating all receivables and sales of the portfolio companies the Service Company achieves economies of scale and thereby reduces the
costs for each of the companies. The Service Company acts as an
outsourcing agent for the sales, accounting and administrative
functions of each portfolio company, but it is controlled internally
until the portfolio company is ready to be sold, at which point the
acquirer can retain the cost-savings by “plugging in” its own sales,
accounting and administrative staff.
The Service Company is also used to interpose control and monitoring
mechanisms in each portfolio company to protect Wyndham’s investment in
each case. This critical control is Wyndham’s solution to a major
problem in doing business in emerging markets, namely the lack of
corporate financial and operating controls.
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