Investment Banking: Wood Products Manufacturer

Client

A private manufacturer of Wood Products.

Needs

  • After founding the company and building it for 24 years, our client wanted to spend more time with his family.  However, he did not want to exit completely, as he still enjoyed his customer relationships.
  • Our client wanted to make sure the company he built continued as a going concern and key employees retained their positions.

Solution

  • Our client hired BlueWater Partners to act as its exclusive financial advisor and pursue a sale of the company to a qualified, professional manager.
  • Met with our client and key personnel individually to understand their needs and desired outcomes, and developed a scenario that satisfied our client’s wishes for him and his personnel.
  • Conducted a comprehensive assessment of our client’s business strengths, weaknesses, opportunities and threats.  Developed a set of criteria for the ideal successor to the founder.
  • Developed a detailed Offering Memorandum and executed a marketing plan against a targeted list of buyers located throughout the Midwest.
  • Analyzed, negotiated and reviewed potential deal structures and tax implications with several interested parties.

Result

  • Our client was acquired at a valuation equal to 9.2 times EBITDA.  Terms included cash, a small note, a long-term lease of the real property and an employment agreement.
  • We generated three (3) qualified Letters of Intent, which enabled our client to maximize the value received for the company and realize his other desired outcomes.
  • Our client was able to hand pick his successor and ensure all key personnel remained with the company in the same positions they held pre-acquisition.
  • Our client is able to spend more time with his family while continuing to manage customer relationships.

 

Published with client permission

Investment Banking – Technology

Client

A private Technology company.

Needs

  • Our client needed to raise capital to meet working capital requirements and fund ongoing product development and capital expenditures.
  • One of the three shareholders filed suits against the corporation and its shareholders in an attempt to either gain control or exit his position and recoup his investment.  Legal expenses soared and communication broke down.  The ensuing conflict derailed previous attempts to raise equity through private placements.

Solution

  • Our client hired BlueWater Partners to act as its exclusive financial advisor and pursue a sale of all or part of the company to a qualified strategic buyer.
  • Met with each shareholder individually to understand his or her needs and desired outcomes, and developed a process that preserved each shareholder’s interests.
  • Conducted a comprehensive assessment of our client’s business strengths, weaknesses, opportunities and threats.
  • Developed and executed a marketing plan aimed at a targeted group of strategic buyers located throughout the U.S.
  • Analyzed, negotiated and reviewed potential deal structures and tax implications.

Result

  • Our client was acquired by a strategic buyer at a valuation greater than 25 times historic peak revenues.
  • Terms included cash and stock.  The dissident shareholder recouped his capital contribution, while the other shareholders remain employees of the company, hold stock in the acquiring company and retain the opportunity to realize further value appreciation (the acquiring company anticipates a liquidity event in 3-5 years).
  • A prominent venture capital firm simultaneously funded the acquiring company.

Published with client permission

Performance Improvement: Fabricated Metal Product Manufacturer

Client

Fabricated Metal Product Manufacturer

Needs

  • Our client was struggling to make payroll and feared they would be forced to shutdown the company absent another solution.
  • Management needed help determining whether or not the company should continue as a going concern and, if so, implementing an improvement plan.

Solution

  • Spent the first 24 hours analyzing the company’s recent performance and identifying problems and solutions.
  • Led a weekend planning session with management and other employees and concluded the company needed to radically restructure its operations.
  • Developed a plan to implement the restructuring during the following week.
  • Built operating and cash flow models to measure progress and results.
  • Provided management with long-range performance improvement plan to ensure sustainability.

Results

  • Reduced headcount by 35 employees.
  • Went from operating 24-7 (with related overtime premiums) to two 10-hour shifts, five days a week.
  • Improved on time delivery and reduced scrap and rework.

Performance Improvement: Injection Molded Plastics Manufacturer

Client

Injection Molded Plastics Manufacturer

After being put on probation by customers and asked to meet weekly by its senior lender, the executive management team of a plastic processing company engaged BlueWater Partners Turnaround Consulting. With our help, the company started generating positive cash flow, strengthened its balance sheet, and improved its operations. The key to success? A comprehensive performance improvement plan. As a result, the company made its first profit in two years while making sustainable changes to its culture and processes.

Problem

  • Sales declined 24% year over year
  • Wrote off inventory equal to 16% of sales
  • Missed multiple shipments to major customers
  • Lost a key customer due to financial performance
  • Projected large cash flow deficits for the coming year
  • No cash or working capital

Solution

  • Implement a 30 Day Plan: immediate cost and cash burn reduction and 13-week cash flow model
  • Implement a 100 Day Plan: improve profitability and cash flow
  • Develop five daily key process indicators (KPIs)
  • Create three processes and metrics to manage inventory and support delivery to customers: days on hand, deliver on time to warehouse, and ship on time
  • Employ a monthly sales and operations planning (S&OP) process to predict next month’s financial results
  • Put into practice a Management Advisory Board to address major strategic and financial issues on a monthly basis
  • To ensure a positive return on investment and help our client’s cash flow, we proposed a small retainer plus a success fee based on profitability.

Results

  • Cut labor, manufacturing overhead, and SG&A 24.4% (excluding material, but including scrap reduction)
  • Improved on time delivery performance to 99% or more
  • Reduced inventory 26.7% with minimal write-offs
  • Realized first profit in two years despite a 24% drop in revenues
  • Management is now able to predict financial results and make real time operational adjustments to avoid after the fact surprises
  • Senior lender’s renewed confidence in management provided the foundation for the relationship to continue through the recession

Performance Improvement: Metal Stampings Manufacturer

Client

Metal Stampings Manufacturer

Needs

  • Our client wanted to hire interim management to improve operations in a compressed timeframe.

Solution

  • Developed and executed a strategic plan.
  • Assumed management of all customer relationships, including OEMs like Ford, GM, and Honda and Tier 1 supplies like Delphi and Visteon.
  • Recruited new senior management talent.
  • Installed systems and controls to track key metrics: on-time delivery, expenses, sorting, expedited shipments, reduction in overtime, customer complaint resolution, and elimination of rework.
  • Improved communication and the relationship between management and production employees.

Results

  • Achieved positive cash flow (EBITDA) within 90 days.
  • Reduced expedited shipments from 55 per week to 2 per week in 30 days, simultaneously reducing headcount and increasing production.
  • Management has a much-improved understanding of the problems production employees face and how to communicate the company’s goals and objectives.

Restructuring and Turnaround: Fabricated Metal Product Manufacturer

Client

Fabricated Metal Product Manufacturing

Needs

  • Our client wanted to explore alternatives to liquidation, which was recommended by another turnaround firm.
  • Preserving jobs was one of our main objectives.

Solution

  • Worked closely with our client’ s bank to develop and implement the plan.
  • Identified a private equity group capable of completing a transaction under very strict parameters imposed by the bank.
  • Assisted in negotiating and structuring the terms and conditions of the deal and facilitated the closing.

Results

  • Completed the transaction in 30 days.
  • Saved 180 jobs.
  • Ensured there was no disruption to customers.

Restructuring and Turnaround: Special Dies Manufacturer

Client

Special Dies Manufacturer

Needs

  • Initially asked to help a secured lender evaluate an offer to buy the assets of a financially distressed customer, our client ultimately engaged us to serve as receiver.

Solution

  • Managed the winding up of the client company with the goal of maximizing shareholder value.
  • Collected accounts receivable, prepaid expenses, and deposits and liquidated work-in-process and fixed assets.
  • Communicated with creditors and employees throughout the process.
  • Presented the dispersal plan to the court.

Results

  • Maximized collection and liquidation proceeds while minimizing associated costs.
  • Preserved the estate and satisfied creditors.

Turnaround Consulting: Commercial Printer

Client

Commercial Printing

A commercial printing company engaged BlueWater Partners Turnaround Consulting to help improve its cash flow and strengthen its balance sheet. In just 8 months, we met our goals. Moreover, the company’s senior lender returned the relationship to commercial banking from special assets.

Problem

  • Net loss in 5 of the last 6 years and 22 of the last 23 months
  • Lost significant shareholder equity during the same period
  • Negative sales trend
  • Senior lender moving relationship to Special Assets Group

Solution

  • Sell non-performing assets to raise cash and pay down debt
  • Reduce breakeven through targeted cost cutting, including permanent workforce reductions (one-third)
  • Use temporary workers to manage variability of business
  • Change board of directors’ role and hire a general manager
  • Develop daily flash report and weekly scorecard including key sales and operations metrics

To ensure a positive return on investment and help our client’s cash flow, we proposed a small retainer plus a success fee based on profitability.

Results

  • Achieved profitability within the first month of engagement
  • Liquidated a non-core business unit and sold under-utilized real estate
  • Reduced breakeven by 29%
  • Turned over day-to-day operations to new general manager
  • Negotiated new line of credit and covenants
  • Reduced external quality incidents to only one per month from 2-3 per week
  • Improved delivery times to less than 5 days from 2-3 weeks

 

Turnaround Consulting: Construction and Mining Machinery and Equipment Distributor

Client

Construction and Mining Machinery and Equipment Distributor

After its senior lender sent default letters and made it clear it wanted to exit the relationship, the shareholders of a family owned aftermarket construction and mining machinery parts distributor engaged BlueWater Partners Turnaround Consulting to advise on alternatives, including a sale to a supplier or liquidation. In the end, we worked with the lender and supplier to negotiate a loan participation agreement, which gave our client time to turnaround its operations, the bank an exit plan, and the supplier an opportunity to help save one of its major customers. The keys to success in this case?A comprehensive review of the company’s alternatives, a well developed understanding of each stakeholder’s interests, facilitation of wider and more inclusive communications, and BlueWater’s passion for creative solutions.

Problem

  • The recession eliminated the company’s earnings and weakened its already overleveraged balance sheet
  • Global production capacity contracted and credit terms tightened, leaving the company with inadequate inventory to meet customer demand as the economy started to recover
  • Lack of earnings, a weak balance sheet and tougher underwriting standards made refinancing highly unlikely and liquidation the most obvious next step
  • As is often the case, the company’s largest unsecured creditor was also its largest supplier
  • The company and the supplier had negotiated for 6 months, but were unable to agree on a payment plan to reduce the supplier’s exposure or the structure of a joint venture
  • The fourth generation of the founding family demanded that they remain in control of the company should it continue operations

Solution

  • Prepare a valuation opinion and analyze the company’s balance sheet for undervalued assets and short-term liabilities that could be restructured as long-term debt
  • Build a 13-week cash flow model and identified cost reduction opportunities
  • Prepare a liquidation analysis to illustrate the unattractive impact to the senior lender and supplier
  • Implement budget and plan to improve profitability during current year and next three years
  • Present breakeven analysis, 3-year projections, and turnaround plan to supplier
  • Improve communication and visibility with the senior lender to provide the time required to facilitate negotiations between our client, the supplier, and the senior lender
  • Facilitate three-way negotiations between our client, the supplier, and the senior lender

Results

  • Reduced breakeven by over 24% by cutting labor, manufacturing overhead, and SG&A
  • Successfully completed a “loan participation agreement” between the senior lender, the supplier, and our client
  • Senior lender secured a clear path to exit in less than 1 year, which was ahead of schedule
  • Supplier eventually transitioned from an unsecured to a secured position while retaining a major customer
  • Client retained ownership
  • Improved on time delivery performance by opening up credit lines with supplier during negotiations