Professional Accomplishments
Found Buyers and Negotiated Profitable Sale of a Failing Manufacturing Company
Situation
A family-owned manufacturer of hydraulic cylinders, power units and related equipment was performing poorly as the health of the owner declined. I was called in to consult by the President of the company, the owner’s nephew, but the owner refused assistance. After the owner’s death two years later, the President asked for advice about the now failing company. Assessment of the financial statements revealed that the company had few financial controls in place. A cash flow and liquidation analysis determined that the company had sufficient cash flow for only 6 weeks. Analysis of the liquidation value of the company came in at $3.5M-$4M.
Action Plan
Sale of the company to a strategic buyer had the potential to provide greater return to the family than liquidation. The challenge was to keep the company operating long enough to close the sale.
- Reduced “cash burn” to provide enough runway for the company to operate until a sale could close
- Modified payment terms for customers and vendors to maximize cash in.
- Chose new business opportunities based on the cash flow they would generate
- Reduced staff by 60%, retaining only shop who did the work and generated revenue
- Created marketing material and distributed to the universe of known potential strategic buyers
Results
Generated a list of eight interested buyers that executed nondisclosure agreements and letters of intent. Entered negotiations with three buyers. Kept company operating and the sale was closed with a strategic buyer. The value to the family, after retiring debit, about 4.5 times what they would have realized with a liquidation.