Our references of Turnarounds
CREDIT SECURITY BY GOOD RATING
In the case of a successful company in the optical industry, there was an unexpectedly high capital requirement. Within the framework of the credit audit, a rating of the company took place, which came to a surprisingly bad result. DRICON helped the company to present itself better and to make the credit negotiations successful.
THE INITIAL SITUATION
A company of the optical industry had years of economic success and steady growth behind it. At this time, the balance sheet policy was focused on optimizing the tax burden. As the economy slowed down company's earnings position and liquidity deteriorated. In order to be able to finance a large order, a loan was needed. In discussions with the house bank, the management noticed that analysts rated the creditworthiness of the company much more negative than expected. In the past, the company did not have an active credit rating system. The new business situation required rethinking and active action.
The task of DRICON was to assist the company in improving the rating. Our team has made the following contributions:
- Workshop for analyzing and explaining the results of the rating
- Formulation of proposals for improving creditworthiness
- Creation of company documentation
The work was carried out together with the financial accountant of our client. In addition to increased efficiency, this also resulted in a coaching effect.
The analysis of the rating results showed that the company's creditworthiness was classified as bad for two reasons:
- 1. The balance sheet policy of the growth years had led to an optimization of the tax burden. This was mainly due to a very high depreciation of capital-intensive machines and inventories. As there were hardly any gains, the equity ratio did not increase in proportion to the company's development. Silent reserves were built up. The market values of the machines and inventories were clearly above the book values. The rating and the equity ratio were, of course, used for the rating.
- 2. The management had informed the Bank's representatives of the business policy and strategy of the next few years. This, however, happened only verbally. There was no documentation and self-contained planning documents. The analysts therefore noted weaknesses in corporate planning.
Through our work we have recognized the deficits and fixed them. Machines were revaluated and the sell of two machines partially covered the hidden reserves. We have documented company planning in a professional form. The creditworthiness of our client improved and further credit negotiations were positive. The management decided to equalize the future balance sheet policy more closely and take creditworthiness aspects into account.
GROWTH FINANCING FOR A COMPANY IN THE PLASTIC INDUSTRY
In order to finance the purchase of a competitor, a medium-sized company needed financing. The loans offered by the banks were not sufficient. DRICON recommended the additional inclusion of equity capital. Through the mediation of an investor, the financing and thus the takeover could be realized.
THE INITIAL SITUATION
Our client, a medium-sized manufacturer of special connecting and securing elements made of plastic, wanted to expand by acquiring a competitor. Our client´s customers included renowned companies from the mechanical engineering and automotive industries. A total of 260 employees were employed at the time. The business development has been expansionary for years and the results have been positive despite the difficult economic environment. An important competitor was available for sale at the time of our commissioning. However, his own financial resources and the loans offered by the banks were not sufficient to acquire the company.
The task of DRICON's consultants was to improve the equity base of the company by attracting a financially strong partner. Our consultants were asked find a company that was willing to finance the further expansion of the company with a substantial amount. The capital should be provided in the form of a silent partnership.
In order to address suitable partners, we have created a presentation document. The core of the documentation was an integrated company planning, which clarified the business potential after taking over the competitor. In addition to the market and competitive position, a risk assessment was also included.
Through our network, we have addressed suitable investment companies and conducted negotiations with them.
We were able to conclude a contract with an affiliate to finance the company. Our client has received a large amount of money to strengthen its equity base. With the capital he was able to finance the acquisition of his competitor.
For our client, the following advantages arose from the cooperation with DRICON:
- Professional business planning was crucial for attracting a financial partner. It could also be used to inform the house bankers.
- The corporate management of our client was significantly relieved by DRICON. The approach of companies through DRICON was very efficient and quickly led to concrete decisions.
- Through the exchange of ideas between our client and our consultants, the negotiations could be conducted optimally.
FURNITURE INDUSTRY: DELAYED REORGANIZATION PROCEDURES THREATEN EXISTENCE
In the case of a well-known furniture manufacturer, strategic questions had not been solved in recent years. This resulted in a negative business development and an increasing liquidity gap. DRICON developed a restructuring concept and successfully led the company out of the crisis.
THE INITIAL SITUATION
Our client is one of the big medium-sized furniture manufacturers in Germany. The poor economic conditions and the increasing pressure by low-cost suppliers had led to considerable sales losses. In recent years, the company lost market shares and generated significant losses in its operating business. The unresolved strategic problems and the poor earnings situation led to financial bottlenecks. The banks slowly lost confidence.
In order to quickly improve the company's situation, we have implemented a two-stage work program.
Stage 1: Inventory
At the beginning of our activity, we first carried out an inventory. We focused on the following areas:
- Liquidity situation and preview
- Cost-effectiveness of the sites and production steps
- Cost reduction potential
It turned out that our client had built up considerable supplier liabilities. Liquidity did not permit short-term settlement of open items. This was also due to the high level of outstanding receivables from customers. The capacity was very poorly utilized in some areas. In the past, short-time work had been repeated. At a second location about 60 workers were employed. Our profitability analysis confirmed that the location had not worked cost-effectively in the last few years. We were also able to identify significant cost-cutting potentials in the company's main business.
Stage 2: Reorganization concept and measures
The focus of our activities was the development of a renovation concept. At the same time, we also pursued short-term restructuring measures. It was clear to all parties that the quality of our work depended on the willingness of the shareholders and the banks to further finance the company.
Our consultants have contributed to the restructuring of the company with the following activities:
- Implementation of emergency measures to secure liquidity
- Negotiation of a payment plan with suppliers
- Planning and implementation of cost reduction measures
- Creation of integrated financial and business planning
- Strategic planning to improve the competitive position
- Negotiation with banks and credit institutions
The restructuring concept confirmed the company's viability. A consistent cost management was necessary for the recovery. The following results have been achieved by the DRICON team:
- Reduction of operating costs by about EUR 3.5 million annually
- Closure of the second site
- Reduction of administrative and overhead costs at the parent plant
- Increased procurement at suppliers in Eastern Europe and Asia
- Obligation of the suppliers to pay 30% of the liabilities incurred
- Strategic realignment through product assortment reduction (reduction of storage costs by approx. 20%)
- Securing liquidity by prolonging the loans of the banks
- New market opportunities through a planned and implemented commitment in Russia by DRICON
After one year of DRICON's recommended and supported measures the company is on the road to recovery. Despite the difficult economic environment, cost-cutting measures have contributed to a considerable improvement in earnings
MACHINE BUILDING: DECLINING DEMAND THREATENS THE FUTURE OF THE COMPANY
As a result of the global financial and economic crisis, orders received by a medium-sized machine and plant builder fell by 60%. The cost structures were not adjusted quickly enough and the company was placed in a situation that was threatened by the existence of the company. DRICON supplemented the management of the company by means of an interim management and managed the successful turnaround.
THE INITIAL SITUATION
Our client is a medium-sized machine and plant builder with almost 100 years of company history. In the rapidly deteriorating economic situation, incoming orders declined massively. At the top, the minus was 60% compared to the previous year. The management tried to counteract this by means of measures such as short-time work and inventory reduction. The cost structures could not be adjusted quickly enough. The liquidity reserves were almost completely exhausted, while the operating losses were cumulative on the levels of livelihoods.
In a three-stage work program, we initially stabilized the company situation and subsequently led to healthy growth again.
Stage 1: Inventory and liquidity assurance
Due to the urgent need for action, we focused on securing the liquidity in the first step. For this purpose, a comprehensive stocktaking was carried out with the objective of creating an immediate action package. The list of measures included:
- Active receivables management & consistent dunning
- Negotiation of claims and payment plans of suppliers
- Sale of non-operating assets
- Adjustment of sales conditions (payment targets, order quantities)
- Realization of further cost reduction potentials
- Negotiations with lessors and financing partners
- Establishment of a daily updated status report
The immediate measures led to a rapid stabilization of the company situation. From the inventory, however, there were different areas where further measures were necessary. This included in particular the purchasing organization. Significant optimization and cost reduction potentials have been identified. In addition, weaknesses were shown in internal processes and procedures. There were also strong dependencies on two foreign markets.
Stage 2: Interim management
The capacities in the management of our client were completely exhausted. For this reason, we supplemented the management of the company for a transitional period. On the basis of the international expertise of our consultants, we were able to achieve the following successes during this period:
- Development of alternative suppliers within a worldwide sourcing
- Reduction of purchasing costs by an average of 7%
- Determination of target quantities and optimization of inventories
- Process optimization in purchasing, production and logistics
- Gaining new customers and successful market entry in three countries
- Development and establishment of an organizational manual
- Implementation of reporting and controlling standards
These measures significantly improved the company's cost structures. Existing dependencies were reduced, new markets opened. The internal organization was significantly more efficient and employee satisfaction was increased.
Stage 3: Securing the long-term growth strategy
Following the interim management, a long-term growth strategy was developed together with the management of the company. Through the creation of a company advisory board, a supplementary corporate management tool was established. The growth strategy is reviewed and adjusted at regular intervals. The following measures have been successfully implemented by us:
- A multi-day strategic consulting workshop on the topics of products, markets, personnel and marketing
- Transfer of workshows into a five-year plan
- Establishment of a company advisory board
About one year after the beginning of our activities, the company successfully surpassed the crisis that threatened its existence. The measures taken, helped to secure the entrepreneurial existence and significantly improved the earnings situation.