For Private Equity
Sourcing Margin Is a Value Creation Lever Most
PE-Backed Businesses Haven't Pulled It.
Your portfolio company’s sourcing model was built for the business it was, not the business you are building. The gap between what your wholesaler charges and what the factory actually costs is rarely visible on the P&L. But it is there, in every order, every year, compounding against your EBITDA and your exit multiple.
ET2C works with private equity firms and their portfolio companies across the full investment lifecycle from pre-acquisition due diligence to 100-day margin acceleration through to exit-ready supply chain infrastructure. We give you the on-the-ground intelligence and operational capability to turn sourcing into a measurable value creation lever.
The Leak Rarely Shows
on the P&L.
Most portfolio companies source through trading agents, wholesalers or intermediaries. It is the default model and it works, up to a point. The problem is the structural margin that sits between your business and the factory. Typically 20–30% added to every order, silently, without appearing as a line item your management team or your deal team will see at acquisition.
It is not an operational failure. It is a structural one. And it is one of the most reliable and fastest-moving levers in any sourcing-intensive portfolio company value creation plan.
| The Structural Margin Problem | What It Means for Your Portfolio |
|---|---|
| Wholesaler/agent mark-up on every order | 20–30% of product cost transferred to an intermediary — not to EBITDA |
| No direct factory relationships | Acquisition value built on a supply chain your management team does not own or control |
| Single-source concentration | Tariff exposure, disruption risk and negotiating weakness concentrated in one market |
| Defects and chargebacks absorbed | Quality failures hitting margin post-shipment — recoverable with the right on-the-ground QC model |
| No factory-floor visibility | You cannot manage what you cannot see. Your agent's incentives are not aligned with yours. |
Across the investment lifecycle
Pre-Acq to Exit. One Partner.
ET2C has structured its PE offering around the investment lifecycle because that is how value creation actually works. Each phase has a different priority and a different deliverable. We align to all of them.
Pre-Acquisition: Sourcing Due Diligence
Before you sign, you need to know what you are actually buying. Your agent finds a factory. We tell you what is in it.
ET2C’s pre-acquisition sourcing review gives your deal team a clear picture of the sourcing risk embedded in the target, the structural margin gap, the concentration risk, the quality exposure and the realistic cost of fixing it. This is intelligence that does not appear in a management presentation
• Factory-level cost benchmarking what direct pricing looks like vs what the business currently pays
• Supplier concentration and single-source risk assessment
• Quality and compliance audit against your category and jurisdiction requirements
• Realistic margin recovery estimate for Year 1 and Year 2 post-close
• Assessment of what a buying office transition would cost and how long it would take
Typical output: A UK-listed retailer engaged ET2C’s buying office model post-acquisition. Net product cost savings of 20% were delivered in year one. The partnership is now approaching a decade.
100-Day Plan: Rapid EBITDA Acceleration
The first 100 days post-close are where sourcing margin recovery either starts or gets delayed by 18 months. ET2C is built for speed.
Our buying office model can be operational within 8 weeks. No entity incorporation, no recruitment cycle, no legal infrastructure to build. Your portfolio company gets a dedicated, on-the-ground team in its key sourcing market working exclusively to service your business from day one.
- Dedicated buying office team operational in 8 weeks, no capex
- Direct factory relationships established, agent margins removed from the cost structure
- Immediate benchmarking of current supplier pricing against factory-direct equivalents
- QC framework embedded at factory level, defects caught before shipment, not after reducing quality associated costs to margin
- 100-day progress reporting aligned to your value creation plan milestones
Client result: A UK-listed retailer engaged ET2C’s buying office model post-acquisition. Net product cost savings of 20% were delivered in year one. The partnership is now approaching a decade.
Hold Period: Supply Chain Continuity and Margin Protection
Once the early gains are secured, the priority shifts to protecting them. Supply chains are not static. Markets move, tariffs change, supplier relationships evolve, and quality can drift without active management.
ET2C’s buying office model provides the ongoing operational infrastructure that keeps your portfolio company’s sourcing ahead of these pressures throughout the hold period.
- Dedicated buying office team operational in 8 weeks, no capex
- Direct factory relationships established, agent margins removed from the cost structure
- Immediate benchmarking of current supplier pricing against factory-direct equivalents
- QC framework embedded at factory level, defects caught before shipment, not after reducing quality associated costs to margin
- 100-day progress reporting aligned to your value creation plan milestones
Exit: Scalable Infrastructure That Buyers Will Pay For
A portfolio company with a structured, transparent, factory-direct supply chain is a more attractive asset than one still running through intermediaries. At exit, your sourcing infrastructure is part of the equity story.
ET2C works with your management team in the run-up to exit to ensure the sourcing model is documented, scalable and positioned correctly in the vendor due diligence process.
- Scalable buying office infrastructure, grows with the acquirer’s volume without restructuring
- Full supply chain transparency documentation for the VDD process
- Margin improvement trajectory presented as a forward value creation opportunity
- ET2C can remain in place post-transaction, providing continuity for the incoming owner
Our Services
What We Deliver for PE-Backed Businesses
ET2C’s core service offer maps directly to the challenges of a sourcing-intensive portfolio company. Each service can be engaged independently or as part of a full lifecycle partnership.
| Service | What It Delivers for Your Portfolio |
|---|---|
| Sourcing Due Diligence | Pre-acquisition cost benchmarking, supplier risk assessment and margin recovery estimation, structured for deal team and IC use |
| Buying Office | A dedicated on-the-ground team in your portfolio company's key sourcing market, operational in 8 weeks, no capex, no entity incorporation |
| Sourcing & Procurement | Factory-direct sourcing across China, Vietnam, India and Turkey removing the agent margin layer from every order |
| Quality & Compliance | In-line and final inspection, factory audits, corrective action management and ESG/compliance reporting |
| China Plus One | Rapid supply base diversification away from single-market concentration, new markets operational in weeks, not months |
| Market Intelligence | Ongoing pricing benchmarks, supplier performance data and market reporting to support management decisions and board reporting |
Proven Results
What Direct Sourcing Delivers in Practice
The numbers below are drawn from actual ET2C client engagements with businesses where intermediary sourcing was the established model before ET2C’s involvement.
20% net cost saving in year one. A listed UK retailer engaged ET2C’s buying office model to bypass their incumbent sourcing partner. Direct factory relationships were established within 8 weeks. The relationship is now approaching a decade.
8.4% defect rate reduced to 0.6%.One portfolio company was absorbing £180k in annual chargebacks before ET2C’s QC framework was embedded at factory level. After engagement: 0.6% defects, zero chargebacks, margin fully recovered in year one.established
Diversification in 60 days, not 18 months. A portfolio company with 100% China concentration needed rapid diversification following tariff escalation. ET2C had a Vietnam buying office team operational within 8 weeks no entity incorporation, no recruitment risk.
Why ET2C
The Structural Advantage of an On-the-Ground Partner
The sourcing market is full of consultants who will tell you where the margin is. ET2C is different because we are already inside the factories. Our 250 colleagues across China, Vietnam, India and Turkey are not visiting suppliers they are embedded in them, every day, on behalf of our clients.
This is what makes ET2C a practical PE partner rather than an advisory one. We do not produce a report and leave. We build and operate the sourcing infrastructure that delivers the margin improvement you modelled at acquisition, and keeps delivering it through the hold period and beyond.
| ET2C | Sourcing Consultant | DIY In-House Team | |
|---|---|---|---|
| On-the-ground execution | Yes 250 colleagues across 4 markets | No advisory only | Yes but 18–24 months to build, $500k–$1M capex |
| Operational in 8 weeks | Yes established entities, no incorporation | N/A | No entity setup alone takes 6–12 months |
| Factory-direct relationships | Yes 2,000+ suppliers across categories | No | Possible but built from scratch |
| PE lifecycle experience | Yes pre-acq through to exit | Variable | No |
| No capex required | Yes one transparent monthly fee | Project fees | No fixed overhead regardless of volume |
Get Started
Request a Portfolio Margin Review
If your portfolio company sources product through wholesalers, agents or trading intermediaries, there is almost certainly margin available to recover. The question is how much, and how quickly.
ET2C’s Portfolio Margin Review is a structured, rapid assessment of the sourcing opportunity within a specific business. It gives your deal team or operating partner a clear picture of the gap, a realistic recovery timeline and a recommended path to execution.
The review is available at pre-acquisition stage or post-close, and can be completed within 2–3 weeks of engagement.
To request a Portfolio Margin Review or to speak with our PE team
FAQ - PRIVATE EQUITY – Your Questions Answered
Frequent Asked Questions
Engagement varies. Some deal teams bring us in at the pre-acquisition stage to run a sourcing due diligence review as part of commercial or operational DD. Others engage us in the first 100 days post-close as part of the value creation plan. Either works the earlier the engagement, the faster the margin recovery begins.
Our buying office model is typically operational within 8 weeks of engagement. This covers strategic assessment, team recruitment, onboarding and full alignment with the portfolio company’s category requirements. There is no entity incorporation, no capital expenditure and no lengthy recruitment cycle on the client side.
It is a structured assessment of the gap between what the portfolio company currently pays through its intermediary model and what factory-direct pricing looks like for the same products. It covers supplier concentration risk, quality exposure and a realistic Year 1 margin recovery estimate. Output is a short report structured for deal team and IC use.
The buying office model operates on a transparent monthly fee that covers team costs, ET2C’s operational infrastructure and ongoing management. There is no capex, no employment liability and no entity overhead. The fee structure is straightforward and can be presented cleanly in a value creation plan.
Yes and this is typically how it works in practice. ET2C operates as an extension of the portfolio company’s operational team, reporting to the management team on a day-to-day basis with agreed reporting to the PE fund’s operating partner or board representative. We align to your governance structure.
Where the acquirer wants continuity, yes. ET2C’s buying office model can transfer cleanly to the incoming owner without restructuring. The supplier relationships, QC frameworks and operational processes are built in the portfolio company’s name, not ET2C’s meaning the infrastructure is genuinely transferable and genuinely adds to exit value.
