Financial Restructuring Engagement #2
Client — $90 million Distributor of Industrial Supplies
Improvement Opportunity
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Emphasized growth over profitability and working capital management
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Lost money for three consecutive years; in default on bank covenants
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Longtime bank relationship deteriorating
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Suppliers holding shipments due to late payments
Approach
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Immediately focused attention on collections to improve cash position
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Kept bank involved and informed of plans, activities, and progress
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Measured sales performance leading to elimination of low-production salespeople
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Reduced administrative and overhead personnel
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Analyzed profit by customer and product; created new pricing strategy and shifted cost of certain personnel to customers
Results
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Reduced ineligible AR by $2 million
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Bank relationship stabilized during restructuring period
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Consistently profitable each month once cost reductions completed
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Obtained new financing on very favorable terms; previous lender paid in full
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