Case study 1

Secure Printer for Mobile Networks

Background

A private equity business invested in a start-up business who 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 being serviced and the company was in breach of all the bank covenants. A request for 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
1. Prepared a model of profitability per production constraint
Redesigned the quoting model based on profitability and customer requirements
1. We charged a premium
  1. for smaller runs
  2. Faster production
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 feel through, the due diligence led to a price adjustment, a conflict arouse between the existing management and the owner. Existing management wanted to procced, the investor did not. The management team resigned in mass 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
1. Identified underperforming product lines
2. Identified underperforming customers
Divested product lines and freed up capital
Re negotiated 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 enable the businesses to pay back most of its loans. The refocused business was profitable at lower level of activity. The new cost base and narrower position enabled the business to introduce new product lines.

From being in a barely breakeven situation, the return on capital skyrocketed and its has managed to maintain this an above industry profitability, despite initially shrinking to 40% of its previous turnover, it is now over 200% of its initial turnover.

Caravan Manufacturer

Background

A large corporate divested of its interest in caravan manufacturing, The new owner and the existing management parted ways in 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 through profitability analysis
1. Understanding a per model profitability
2. As well as a profitability per production constraint
Prepared a new financial model
1. Revised pricing
2. Discontinued models
Negotiated standstill and repayment plans with key creditors
1. Resolved numerous disputes with customers (This was precipitated by a lengthy warranty processes, this freed up management to focus on the business
Re engineered key processes
1. Warranty
2. 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.

Retail

Background

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 is will get 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
1. Gain an understanding
  1. of profitability per customer
  2. Of the profitability per product line
  3. Per retail store
  4. Capital requirement
2. As well as a profitability per production constraint
Realign management incentives based on cumulative profitability and csh 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
Re negotiated 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 whether the GFC , and a substantial premium was paid for this entity when a private equity investor bought out the entire group.

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