The well-established niche construction company had been trading profitably since the 1940s. The relationship and trust had broken down between the owner and his succession plan ( MD & Board ). Margins had dropped from 35% 2 years ago to 10%. The business had become increasingly loss-making over the last 4 years and cash was becoming critical. Management had become overwhelmed by cash pressure and had failed to respond to the challenge they faced. The business value in the joinery and maintenance was hidden behind some unprofitable construction contracts. There was a bank meeting planned to review the last 12m profits and plan. The balance sheet and bank position were secured by a property.
Ability to integrate into the client company
Tom met the business owner and his wife on Sunday evening with the corporate finance partner. That evening the equity and likely role were agreed. On Monday the incumbent MD was removed and Tom took over on Tuesday. Immediately repaired the family owner – operating board relationship, got a grip on the cash and financial position, and identified the turnaround plan and MBO / pre-pack options, and evaluated the construction contracts and cash impact.
Impact on the business/bottom line
The business was short of c1m cash to continue trading: pre or post-restructuring. Newco was defined and pre-pack /funding/investor put in place. The pre-pack sale was inconclusive so the business was put into administration in order to protect the director’s duties and creditors positions. On presentation of the plan to the customers they determined their contracts, and the business was put into liquidation.
The sales and marketing plan was created to recover and support Newco margins.
Overall contribution/achievement of objectives
The bank overdraft and loan was repaid in full, improving the bank position by £500k. Creditors will receive a substantial dividend: and the complete collapse of the business prior to concluding the process was averted, retaining c80% of the debtors’ book value.
Got the team on board from day 1: relationship and motivation focused to retain the employees’ engagement; right up until the end of the traumatic complex process. Put the management structure and review process in place to define team accountability, triage cash and get complete financial control. Got a complete grip on the cash and profit position of the business, using external support / to enable the FD / board to cope with their roles.
Leadership/people management skills
Some comments: ” excellent work ” ” the preparation and delivery of the turnaround were near textbook stuff “ “team were fully on board” “achieved a complete handle on the financial position”. “Tragic that he arrived too late”. Shop floor comments “at last” ( referring to the fact, at last, there was a good plan )