Case study 1
Secure Printer for Mobile Networks
Background
A private equity business invested in a start-up business that produced secure pre-printed vouchers for the telecommunications industry.
The brief
None of the targets in the business plan where being met, the bank loan had not been serviced and the company was in breach of all the bank covenants. A request for a further funding round had been initiated and we were tasked in assisting the private equity firm in deciding what the best course of action would be.
What we did
- Brought the financial information up to date
- Prepared a detailed customer and product analysis
- Prepared a model of profitability per production constraint
- Redesigned the quoting model based on profitability and customer requirements
- We charged a premium
- for smaller runs
- Faster production
- We charged a premium
- Planned the production to focus on cash generation
- Invested time (and resources) to resolve production constraints
- Developed a revised business plan and cash flow model
- Used the revised cash flow model and business plan to renegotiate with the bank regarding the covenants
- Secured fresh short term funding
- Developed an investment memorandum
The outcome
Sold the business to a listed entity, the surety for the bank loan was replaced, and upside was secured through warrants being exercised in the listed entity.
Ultimately the MD was replaced.
Case study 2
Distributor of pharmaceutical products
Background
A proposed merger between the entity and a potential suitor fell through, the due diligence led to a price adjustment, a conflict arose between the existing management and the owner. Existing management wanted to proceed, the investor did not. The management team resigned in masse in order to force the hand of the investor.
The brief
Evaluate the business and execute a strategy to save the business.
What We Did
- Performed a full review of the business
- Reorganised the financial information
- Identified underperforming product lines
- Identified underperforming customers
- Divested product lines and freed up capital
- Renegotiated terms with key customers
- Streamlined the business processes to focus the business
- Secured new product lines to represent
- Brought in a new management team
The outcome
The capital committed by the investor, and required by the business dropped 75%, this enabled the businesses to pay back most of its loans. The refocused business was profitable at a lower level of activity. The new cost base and narrower position enabled the business to introduce new product lines.
From being in a barely break-even situation, the return on capital skyrocketed and it has managed to maintain this, and an above industry profitability, despite initially shrinking to 40% of its previous turnover, it is now over 200% of its initial turnover.
- Case study 3Caravan Manufacturer
Background
A large corporate divested of its interest in caravan manufacturing, The new owner and the existing management parted ways in an acrimonious manner, an interim manager was installed, however the business deteriorated rapidly.
The brief
Return the business to what it used to be
What we did
- Performed a thorough profitability analysis
- Understanding a per model profitability
- As well as profitability per production constraint
- Prepared a new financial model
- Revised pricing
- Discontinued models
- Negotiated standstill and repayment plans with key creditors
- Resolved numerous disputes with customers (this was precipitated by a lengthy warranty process, this freed up management time to focus on the business)
- Re engineered key processes
- Warranty
- Production planning
- Help secure additional funding
Outcome
Despite the additional funding, the holding company continued to experience distress, a new equity investor was brought into the holding company, unfortunately this relationship broke down and most of the gains were reversed.
- Performed a thorough profitability analysis
Case Study 4
RetailBackground
A listed company had a wholesale and retail subsidiary in Australia, despite impressive turnover growth the business was unable to generate cash flow and the roll out of new stores was causing cash flow constraints in other areas of the business.
The brief
Determine if the group would achieve the required cost of capital in its Australian subsidiary, and find a more efficient capital structure to fund the growth.
What We did
- Performed a through profitability analysis
- Gain an understanding
- of profitability per customer
- of the profitability per product line
- of profitability per retail store
- total capital requirement.
- Gain an understanding
- Realign management incentives based on cumulative profitability and cash flow, with the ultimate goal of making this business a self-sustaining entity requiring no further investment from the parent to fund growth.
- Secured additional funding.
- Renegotiated creditor terms.
Outcome
With the realignment of management and owner’s incentives, equity based on performance targets, the business shifted its focus from turnover to cash flow, this focus enabled it to weather the GFC , and a substantial premium was paid for this entity when a private equity investor bought out the entire group.
- Performed a through profitability analysis
