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RESTRUCTURING AND RECOVERY IN THE INDUSTRIAL MARKET — CMAG Consultants Revitalize Struggling Business and Reap Returns for Owner
Problem
Despite boasting a heritage that goes as far back as the late 1800s, a Michigan-based manufacturer of industrial stamping press parts has struggled along a roller coaster of economic challenges for more than 20 years. Originally consolidated in 1986, inconsistent economic times forced the company to file for protection under Chapter 11 of the U.S. Bankruptcy Court. It operated under Chapter 11 for several years unsuccessfully and emerged as a much smaller entity dedicated to making press parts and providing services only.
After emerging from bankruptcy in 2001, the $20 million company operated at a moderate profitability level until early 2005. In March of that year, the financial institution that owned the company decided that the manufacturer did not fit into any of their core business lines. It was time to devise an exit strategy.
Solution
The financial institution brought in Carl Marks Advisory Group (CMAG) to most effectively achieve the exit strategy. CMAG appointed an interim President/CEO and began to oversee the company’s day-to-day management. In addition, CMAG worked to develop a feasible exit strategy and determine a possible value range for recovery.
In an informal business assessment of the manufacturer’s operations, the restructuring team discovered several important findings and used this information to create a dynamic reorganization plan:
- Underutilization of key managers – The new plan made the senior management team accountable and gave it the authority to make responsible, day-to-day operating decisions for the good of the business.
- Poor marketing of the “newly” formed entity – The team developed marketing literature that provided selling tools for the company’s outside sales force. They also enhanced the company’s website.
- Neglect in the area of employee/union relations – The restructuring plan resolved lawsuits with the union, negotiated a labor agreement and integrated returning employees into the negotiations.
- Too much focus on procedures rather than process – CMAG implemented a best-practice philosophy and encouraged the company to use common sense in managing day-to-day business challenges.
- Lack of environmental due diligence – Restructuring efforts focused on developing and implementing a plan to reduce and, where possible, eliminate environmental compliance issues.
As a result of the carefully crafted restructuring plan, company revenues on an annualized basis increased over 15 percent from FY 2005 vs. 2006. EBITDA increase was nearly 40 percent for that same time period. Furthermore, CMAG successfully completed the sale of most of the company’s assets, providing recovery as originally conveyed to the owner/lender.
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