Turnaround Advisory Services
Owners of distressed companies tell us that “cash is tight” and it is not clear how things are going to change.
At Next Point, we deal with the present reality. We work together with owners, and their legal team, as well creditors on a plan that makes sense. We help owners look at realistic options to make informed decisions to start to make things better.
There is no “one size fits all” approach when it comes to improving cash flow needs. The burn rate of cash reserves is uniquely different when in survival mode.
Exploring all options to stabilize cash flow with the owner and key stakeholders should be customized to fit the owner’s situation execution risk tolerance.
Lenders, suppliers, and other stakeholders will be relieved that you have engaged a turnaround advisor. Lenders know the signs of a distressed business but often are not in a position to take a deep dive or provide advice.
Telling them that you have decided to engage a qualified turnaround management service is a good step toward rebuilding the lender relationship and moving past the current hurdles.
What distinguishes Next Point from other turnaround and restructuring advisors? Experience.
Next Point advisors provide hands-on restructuring, turnaround expertise, and support required by our clients when they need help addressing difficult circumstances. We started 20 years ago by helping lenders resolve issues with their borrowers which impaired their relationship.
We are also regularly engaged by companies that realize they have financial and operational issues which are beyond management’s expertise and/or require a third party to assist with some level of transformation.
Together with owners and their legal team and lenders, we lay out the facts and develop a road map for a comprehensive turnaround strategy.
At Next Point, we have helped hundreds of owners of distressed companies get clarity about their options. We aim to provided a high degree of confidence in the options and strategy they choose to ensure they are practical, achievable, and have tangible results.
We serve as advisors, coaches, or interim resources.
Distributor of Roofing Products ($20M)
Our client was a market leading ($20M) distributor of roofing and siding construction products with a 50+ year history of success in WNY.
The company moved to work out with HSBC when a major inventory write-down could not be explained by the incumbent CFO (who subsequently was removed).
Next Point conducted a viability assessment of the company which demonstrated that it could return to viability, but supplemental capital was required to bridge the existing defaults.
Upon Review the principal owner, then 64, elected not to reboot. At that time, Next Point began a divestiture process. In early October, HSBC elected to offset against the client’s operating accounts which was eventually reversed.
At the time, Next Point was still early in the search process.
By early November, Next Point had secured LOI’s from four prospective buyers, three of which were forced liquidation valuation parties.
The fourth was a national chain with strategic intent to enter the Buffalo Market and was a) willing to offer fair market value for all assets and b) willing to close in early December.
The Turning Point
The transaction was closed in early December. HSBC and all other creditors were paid at 100%
In excess of $1M of equity was distributed to shareholders.
Manufacture of Ceramic Insulators ($28M)
Our client was a domestic producer of ceramic insulators for the North American power transmission and distribution industry.
North American producers were under pressure from foreign competition based on lower labor costs.
The industry was in recession and between the combined impact of foreign competition and economic pressure, revenue was down 25%.
Operationally, the company had defective legacy production scheduling and control systems leading to inventory bloat.
In addition, the company continued to carry a legacy defined benefit plan which was severely underfunded.
At the time of our engagement the company was unable to fully service their debt.
Next Point conducted a viability assessment of the company.
Production scheduling changes were implemented which freed up cash to support four months of operating cash deficits.
The company embarked on a fixed cost reduction campaign that returned it to operational solvency.
Subsequently, costing and pricing changes were instituted which improved revenue over 10%.
The legacy lender was replaced with secondary market lending
Eventually, the company, despite being operationally solvent, could not meet the obligations of its defined benefit plan and a Chapter 11 was filed.
The Turning Point
The company exited Chapter 11 with an approved plan and successfully transferring their Pension plan to PBGC.
By this time, the company’s operating performance allowed for lending from a traditional lender which was secured.
Today the company continues to operate and is one of the only two domestic producers of ceramic insulators in the United States.
Industrial Distributor ($22M)
Our client was competing with national competitors in a price sensitive industry.
The owner borrowed money for working capital that he ultimately used to fund the losses of the business.
He began to lose key employees.
Next Point focused on the owner and quickly framed the issues, options and gaps and what he personally had at risk. Continuing to personally invest in the business was no longer a viable option.
We worked with the owner to develop and evaluate several options that included bankruptcy, wind-down of the company and liquidation of its assets, or finding an outside strategic buyer.
Our client determined his best option was to find a buyer, but Next Point needed time to execute that process.
While working through the divestiture process on an expedited time frame, Next Point simultaneously acted as a liaison with the company’s bank, vendors, customers, and other stakeholders to negotiate acceptable terms for keeping the business running so that it could be sold as a going concern.
The Turning Point
The company quickly received five letters of intent from strategic consolidators to evaluate.
The Company was sold to the largest public company in the industry which happened to have additional capacity and was already delivering different products to the same customers as our client. The business owner was able to preserve his personal net worth.
Commercial Printer And Adhesive Mfg ($30M)
The Company was a $30M commercial printer, an adhesive manufacturer and they also produced their own sticky notes product. 2nd generation, 9 family members, 4 active. Cash constrained – unable to fund growth.
Critical challenges: Build consensus on restructure equity, sell, invest; Valuation; Leadership; Family Dissension.
They sold products and services to three very different types of customers.
It was clear that some business segments had higher gross margins and net margins than the others, but the financial information, costs, administrative overhead, etc. were all consolidated under a single entity.
The Challenge was to determine how to maximize the value of the business when a strategic buyer would only be interested in one of these three business segments.
After completing an in-depth valuation range analysis it was determined that the three individual business segments would be more valuable independently than the business as a whole.
We needed to gain clarity around the cost of operating each of the business segments separately – instead of the blurry combined financial information – so that we could represent to a buyer the true direct costs of operating each of the business segments independently.
Next Point developed three different lists of industry specific strategic buyers. We developed one book with four sections, an overall description of the company and a section for each business segment, each including extracted financial information specific to the performance of that division.
The sequence and timing of each sale, which division was to be sold first, second, and third was important because the administrative functions and overhead were going to be divided up and there could be costs accrued if the sales were not coordinated.
The Turning Point
All three divisions were sold separately to three different buyers, and the sum of the parts yielded a larger total sum for our client.