Situation

An outdoor home equipment manufacturer had a single owner who had acquired the company in 2007 and wished for the company to grow prior to sale. However, revenues and earnings had not grown appreciably by 2012. The company had outsourced its manufacturing to multiple factories in China, but lacked appropriate control processes. It also had not built out its supply chain and sales channels, and was lacking in the areas of strategy and financial reporting. The owner, believing there was untapped potential in the company, had hired an investment bank to seek a sale, but no significant progress had been made.

Solution

A new CFO and head of operations, now a NextLevel partner, was brought in to improve company performance and help sell the company within several years. He quickly discovered the most important weaknesses in company processes and went to work to replace them with new processes and personnel. Almost the entire finance team was replaced and the quality of the financial reporting improved to the level required by prospective buyers. Inventory controls were put in place to eliminate an unacceptable shrinkage in inventory that had been experienced and the supply chain was fully built out and managed. A corporate strategy for growth was established and articulated throughout the company with a 4 -5 year financial plan. Managers were held to new standards measured against that plan. The new CFO also released the investment bank that had been hired and, given the company’s need for $50 million in working capital for growth, hired a new banker with the direction to make acquiring this funding the new priority.

Results

  • Within nine months, the growth potential of the company was demonstrated, and a Private Equity Group supplied the needed working capital through acquisition of a substantial portion of the company
  • Within two years, the company tripled revenues and grew earnings eight-fold
  • The same Private Equity Group then purchased the rest of the company and replaced the former owner, yielding him a 20X multiple on his original purchase price from seven years earlier

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