- A Private Equity backed manufacturer and distributor of nutraceutical products and ingredients, performance deteriorated a year and half ago and and was in violation of bank and debt covenants.
- The investors did not see a viable plan to return the company to financial health.
- Investors were losing faith in the management team
- The Company was quickly running out of cash, was up against its bank lines and had very little runway left.
Phase 1 – Assessment
- Determined Historical sales had been well short of budget for the previous two years. There was a lack of sales leadership and a revolving door of sales VPs
- EBITDA and gross margin have been shrinking significantly over the past several years while expenses rose
- Cheaper raw materials from Asia further commoditized the core business
- The company had made a significant bet on its future with a foreign joint venture that was in trouble
- Inventory was a big issue – excess product, expired inventory and generally poor management and systems for management of inventory
- The failed bets on excess inventory, foreign plant investment and the purchase of poor quality raw materials caused the company to violate lender covenants resulting in onerous ongoing debt costs
- The Company was operating in crisis mode
- Made numerous suggestions to the BOD in terms of a go-forward plan and strategy
Phase 2 – Create and execute restructuring plan
- High priority inventory reduction plan to raise cash
- Developed a realistic go forward budget for the Board and lenders. Lender was familiar with KPCG and immediately backed off aggressive behavior upon our engagement
- Implemented new sales plan with rationalized product line and price increases consistent with higher raw material costs
- Identified numerous areas where cost savings could be made in administration and overhead
- Streamlined the sales/marketing & customer service teams and processes
- Installed teams to identify and fix processes to increase efficiency and reduce costs
- Monthly profits now significantly positive
- Re-focused the company on its core business
- Negotiated an operating line with the bank permitting a 6-month recovery runway allowing the shareholders to keep the opportunity alive rather than giving up
- Company is now going forward with a new business plan resulting in modest growth with positive EBITDA and cash flow (EBITDA projected to increase 3X – 4X over prior fiscal year)