Case Study:
The right strategy is worth a mint.
Challenge:
A world-wide leading developer and manufacturer of mint food flavorings and nutraceutical products with annual sales of approximately $100 million, experienced severe cash flow difficulties from the economic recession. The Company also experienced a significant investment loss from non-core business operations. As a result, the Company breached certain bank covenants and the senior lender requested that the loan be refinanced. In the midst of seeking out a refinancing opportunity, two significant lawsuits were brought against the Company.
O’Keefe was engaged to prepare an evaluation of the Company’s operations and a 5-year strategic plan toward strengthening earnings, working capital and deleveraging the Company’s balance sheet.
Solution:
- Analyzing operations to determine unprofitable and non-core business activities and developing appropriate exit strategies for each
- Identifying assets that could be sold quickly to fund the restructuring plan
- Determining key capital investments in people, processes, equipment, and software to position the Company for growth
- Citing areas for cost savings initiatives
- Recommending an incentive compensation package to reward leaders and employees who implement the new operating strategy to reach financial and operational goals
- Assisting in resolution of outstanding lawsuits from a financial perspective
- Performing detailed financial analyses to assist the Company in accurately analyzing its cost structure to determine break-even points and profitability by segment, products, geography, and customers
- Leading bank negotiations, pursuing a new loan facility, and providing other financial guidance to the Company and its Board of Directors during a transition period to a new CEO and CFO
Results:
Preparing a 5-year financial forecast by business segment to be used in securing new financing. We also documented, for the Board of Directors, the expected impact of our recommended changes assuming a 5-year time horizon for a sale/exit plan by preparing a calculation of value of the Company’s current operating segments as of December 31, 2009, and after the implementation of our recommendations to demonstrate the enhancement to shareholder value. Our plan, quantified the risks to be competitive internationally and developed the financial runway to achieve the 5-year plan. The Board, as a result of our analysis, strategically sold the Company to a synergistic buyer providing a significant return to the shareholders.
