Balance sheet optimization

EY analysis of real property data and client projects indicates that up to 1% of a company’s property, plant and equipment (PP&E) balance – or 20% of land – is ripe for immediate monetization, while real estate restructuring can deliver a 6% to 10% internal rate of return (IRR). EY teams deploy big data and proven processes to help you identify cash opportunities fast. Here’s how:

Excess property

A history of M&A activity often results in excess and underutilized real estate that’s costly to maintain and delivers minimal value to the business. EY advisors help companies to quickly identify and dispose of excess property, as well as downsize non-strategic assets via sale leaseback and lease renegotiation.

Real estate restructuring

Companies that plan to stay in a location for more seven years may consider direct ownership or a synthetic lease to drive value and enhance shareholder returns.

Occupancy cost reduction

Decentralized CRE structures can often lead to inefficiencies, an underutilization of assets and a lack of effective benchmarking. Based on EY experience, companies can reduce annual occupancy costs by 5% to 10% by optimizing their real estate footprint and adopting flexible strategies to better adapt to future workplace needs.

An internal study and EY experience indicate that 15% to 30% of the data on fixed asset ledgers is incorrect, mainly due to unrecorded retirements – resulting in $2m to $4m in potential annual savings for each $1b of capitalized cost basis. The EY capital equipment team helps companies manage operating expenses and improve cash flows by focusing on these areas:

Eliminating costs related to “ghost assets”

By deploying data analytics to the fixed asset ledger, leased asset portfolio and fleet and transportation assets down to the store and branch level, EY professionals can help identify “ghost assets” that are no longer in service or in use. Then our team helps companies make sure the fixed asset information is corrected within accounting and tax records to deliver immediate cost reductions through tax and insurance savings.

Driving higher capital asset return

Analyzing and optimizing asset decommissioning and rationalization strategies can add value, as well as assist with planning and P&L impacts – potentially reducing operational costs by 5% to 15%, based on EY experience.

Manage maintenance costs

By applying better oversight and asset monitoring practices, companies can reduce maintenance costs by 10%–15%, based on EY experience.

An unbiased, thorough review of a company’s strategy, operations, marketplace and stakeholders can help improve the design and execution of an effective capital structure. As independent capital markets advisors on more than $80 billion in debt and equity capital, EY teams advise companies on how to manage costs and improve terms in their financing transactions. EY teams deliver comprehensive advice on capital structure strategy, execution and terms throughout the financing process:

Assessing capital structure strategy

Proactively evaluating how the needs and characteristics of a business match up with available capital markets, capital instruments and capital providers effectively supports operations and strategic objectives. For example, covenant-lite capital structures put in place before the pandemic allowed many businesses ample operating flexibility, so they didn’t require any covenant modifications or costly amendments.

Improving economics and financing terms

A competitive financing process can help reduce underwriter and arranger fees, while an independent instrument and pricing perspective can potentially lead to lower interest rates.