This €750 million turnover international manufacturing group was trading in 16 countries with headquarters in Germany. Losses were running at the rate of €100million p.a. The business was owned by a UK PE house; however the equity had no economic value. Furthermore there was no appetite amongst the lenders to increase the level of debt. It was not clear how the business was to return to profitability. Forecasting capability was poor thus the stakeholders were unable to get a clear sight of future viability and funding needs. Credit lines were approaching exhaustion; as a consequence the business was facing insolvency in the near future.
Having undertaken a rapid assessment of the business’ key issues and prospects,( a critical issue being impending insolvency within the context of German insolvency law), a rapid cash management and generation exercise was commenced to bridge the short term cash gap, thereby providing time to better assess the business’ options.
Teams were deployed to generate cash from receivables and inventory.
Management information was improved and a robust forecasting process developed. The management team and the organisation were restructured. In conjunction with the management team a Turnaround Route Map was developed which contained the strategy and financially quantified operational action plans to return the business to profit over a 12 month period.
The key value lever in the first six month phase was to reduce the cost base by €45 million. This phase was to be funded by generating €50 million from working capital by reconfiguring the supply chain, improving inventory management, enhancing receivables processes, and collections.
To mitigate execution risk implementation architecture was introduced. This included, a steering group, cross functional project teams, a chief restructuring officer and detailed route map work stream milestones. The implementation architecture enabled the close monitoring of diverse and rapid performance improvement programmes and highlighted the need for appropriate swift corrective action where necessary.
The quantified operational action plans formed the basis of robust financial projections. The rigour of this work provided the lenders with sufficient confidence to continue to support the business.
The cash generation and cost reduction targets were achieved .The project provided the group with both time and cash to implement the Route Map.
Nature of Support
Case Details: €750m turnover International Manufacturing Group