Chief Executive Officer
Select one of the case studies below:
Business Services
England
We were asked to assist a parcel delivery company with turnover of €150m. The company had been acquired by a private equity firm three years earlier for a consideration of 1.2 x sales.
To justify the price sales had been increased substantially, although little investment was made in the company. This resulted in poor customer service and high operational cash outflows leading to losses of £2m per year and impending insolvency.
The interim CEO quickly determined that much of the additional sales volume was at uneconomic prices and that operational discipline had disappeared. Steps were taken to negotiate pricing or to terminate contracts as well as strengthening the operational management and introduce formal systems to control the nightly sorting of the parcels.
The company returned to profitability over a 6 month period before the balance sheet was restructured through a debt for equity swap and a small amount of new bank debt.
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Restructuring – Distribution
England
A private equity backed vehicle parts distribution company with over 50 UK locations had suffered several years of losses after a MBO. Over the next few years the investor attempted to improve results via a succession of industry experienced Managing Directors to no avail. Eventually a review was undertaken by the investment director and the Non Executive Chairman which resulted in the search for an experienced interim executive with successful turnaround credentials.
The assignment was complex given that the company’s operations were multi-site, and upon a detailed review, had been managed in a style largely unchanged for many years. Compounding the problem were long entrenched employees and an outdated in-house computer system. The investor was looking to realise its investment in about a 2 year time horizon, which necessitated a quick turnaround and the establishment of a profitable growth phase.
The Interim CEO immediately began by recruiting two new operations heads, ‘retiring’ several long serving managers (both in corporate and in the field) as well as the old FD (replaced by an interim FD), replacing the internal audit team, reducing overall headcount by 10%, requiring new daily and weekly cash flow monitoring, and introducing a new modern IT system.
The company’s cash position and profitability were improved by selling a few non-essential (and very valuable) freeholds, negotiating a debt for equity swap, and improving working capital in part by reducing stock holdings and centralizing the company’s procurement process after hiring the company’s first Heads of Procurement and Product Management.
The 12 months assignment drew to a close with the company’s net worth returning to a positive figure, sales increasing by 15%, client retention improving by 10%, the interim FD being named the CEO, and a permanent FD being sourced and hired.
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Manfacturing
Improvement of Financial Reporting & Preparation for Sale – Manufacturing
England
A private equity backed equipment provider to the offshore oil and gas industry with operations in both the UK and US had suffered a liquidity crisis (unable to service its debt) which was significantly impacted by a loss of faith in the company’s financial reporting. The company was slated for an imminent sale, but deal terms and valuations could not be negotiated given the situation.
An Interim FD was brought in to restore confidence and to ascertain whether the business could be sold for an appropriate figure. Upon his arrival he determined that the financial staff lacked quality, no accurate financial and operational systems existed, there was a disconnect between forecasting and accountability amongst management, there was no medium to long term working capital or capital expenditure planning, and the company’s trading terms with its customers were well below industry standards.
The Interim FD agreed with the private equity firm that the correct path was to sell the company’s key operations (to a corporate buyer who could best extract value and be wiling to invest in the business) and immediately recruited 3 high quality interim finance managers to supplement and support the existing finance staff. (Given the short time scales, replacing the existing finance staff was not a viable option.) He also found that the existing management team could be relied upon if sufficiently directed, monitored, and reassured.
In order to prepare the company for sale, cash requirements had to be limited and the finance team had to be very supportive and effective in meeting buyer information requirements.
Limiting cash requirements was tricky in that it could not be done at the expense of the business’s operations being destroyed and/or losing customers due to their not being properly serviced. It became clear that substantial cash could be released from customers by renegotiating trading terms and from resolving a large insurance claim but in both cases management had to be galvanised into acting. Clients eventually agreed to advance and/or progress payments on major projects, which generated a £4 million cash benefit, and the insurance claim resolution released $4 million. In addition, trading terms with customers and creditors were changed and improved.
Improving the financial reporting and providing accurate and informative data for prospective buyers involved the implementation of a number of new reporting systems, instituting a rigorous and centralised cash control regime. It also enabled the completion the annual audit under difficult circumstances and created a very substantial data base for the due diligence process.
The end of the 6 months assignment saw the successful sale of the company for a figure which covered the entire debt load and returned the private equity firm’s original investment along with a small return. The initiatives implemented by the Interim FD also resulted in the company’s sales and operating income doubling within 12 months.
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Retail
Restructuring – Retail
England
A private equity backed specialist retailer with 130 stores throughout the UK was not executing its aggressive expansion and acquisition business plan and was in danger of not being in a position to be floated. Exacerbating the situation was the underperformance of the management team involved in the original MBI.
An Interim CEO, with successes in a variety of retail situations, was brought in (later followed by an interim commercial director and interim HR specialist) not only to identify and implement the short term improvements necessary to give the company breathing space and stave off the issue of trading while insolvent, but also to identify whether it had a long term future that would justify refinancing. The company was in no position to attract a new permanent management team, so any plan had to be predicated upon enhancing the capability, motivation and ownership of the remaining management team. Furthermore, time and financial constraints demanded that implementation take place concurrently as the strategy itself was being developed and refined. A key component in this process was the development of a broadly sketched strategic plan, fleshed out in close conjunction with the management team, that was able to pass rigorous due diligence.
This challenging assignment was successful and a refinancing negotiated. The key results were a dramatic turnaround in performance from a loss of £3m to a profit of £1m within 12 months coupled with a 25% reduction in working capital. The retail chain then traded profitably with additional expansion refinancing, followed by a profitable break up of the company.
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Construction
The owner manager of a distressed construction company approached a number of private equity buyers with a considerable issue: the company had run out of cash, had reported a significant loss for the last 3 years and needed £6M to continue trading. Our client was one of five potential buyers however they felt that their own network did not hold the best CEO or CFO candidates to secure the bid.
A shortlist was compiled and delivered within 1 day consisting of one CEO and one CFO candidate with a track record of successful construction turnaround assignments, with a particular focus on contract management. Both candidates were accepted and engaged on assignment.
During the assignment our Interim Managers:
- Provided operational due diligence which ensured deal completion
- Compiled a robust turnaround plan
- Reviewed, changed & implemented a new commercial strategy
- Rebuilt failing relationships with customers
- Refinanced the business, easing cash flow and tension with suppliers/customers
- Initial loss stated as £2M by the owner manager later identified as £15M within two weeks of the assignment
- Reduced costs by £1.8M
- Recovered £1M from debtors
- Implemented new technology and operational systems to support all functions
- Provided Leadership to the existing management team and disillusioned staff
- Recommended the administration of a non-performing division with a view to trading as a newco
- Gave confidence to both stakeholders and financial institutions
- Company forecast to be profitable within 6 months
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