Will this downturn ever end?

Client Profile:
Private Construction Services Company

Stiuation:
The Company’s revenue had shrunk by 75% and was continuing to fall. They had already been through 6 rounds of layoffs, salary reductions, benefit reductions, and other cost-cutting measures. Still, the Company was hemorrhaging cash. As a result, their bank was becoming nervous and decided to renegotiate the terms of their credit facility. The Company, once a powerhouse within their industry, was on a slippery slope toward insolvency.

Solution:
DCA worked with executive management to develop a written plan which identified additional cost cuts, streamlined operations and jettisoned non-critical business initiatives. In addition, by leveraging the Company’s strong vendor relationships, the Company was able to make up for the reduction in their credit line through improved vendor terms (with no associated interest, which further reduced costs). We also worked to renegotiate the terms of their facility lease which provided additional cash flow benefits. Finally, we were able to help the Company acquire other struggling contractors which were folded into the Company’s infrastructure, providing additional, profitable revenue. DCA met with management regularly to track, and provide feedback on, the team’s performance on the turnaround plan.

Results:
As a result of the above efforts, the Company was able to improve its cash flow by nearly $3 million in less than 60 days, thereby providing the cushion it needed to weather the seasonal winter downturn and operate on a cash-flow positive basis almost immediately.

What happened to my bank?

Client Profile:
Private Business Services Company

Stiuation:
The Company’s bank was recently acquired and had notified the Company that the acquiring bank did not want to renew the Company’s credit facility. Around the same time, the Company was named in a lawsuit for a considerable amount of money. As a result, new banks were reluctant to step in to provide a credit facility to the Company in light of the uncertainty surrounding the litigation. The Company would become insolvent and potentially have to declare bankruptcy if we could not replace their credit facility within 30 days.

Solution:
DCA worked with the Company to develop a strategic plan and financial model to submit to various banks and alternative financing sources. By anticipating the needs of these financial institutions, DCA was able to accelerate the financing process. In addition, we helped the Company negotiate a 30-day extension to their expiring credit facility to allow the new lender to complete their due diligence and ensure a smooth transition.

Results:
By leveraging their preparation and our strong reputation and relationships with these financial institutions, the Company was able to attract several competing offers and secure a new credit facility on attractive terms. This was all completed prior to the expiration of the prior credit facility, allowing all Company operations to proceed without interruption or inconvenience.

Help…I am running out of Cash!

Client Profile:
Private Software and Services Company

Stiuation:
The Company’s lender called us concerned about the Company’s cash burn rate and diminishing cash balance. When we first met with the Company, we discovered that they had only about 60 days of cash on hand at their current cash burn rate. They wanted us to help them raise more capital to ensure they did not run out of cash. We advised them that it would be very difficult, and costprohibitive to raise additional capital given their current operating performance.

Solution:
We facilitated a strategic planning session with their management team, developed a revised strategic plan and operating model, and assisted them to reduce their cost structure while focusing their finite resources on those areas of the business that were critical to ensuring their long-term success and maximizing shareholder value. DCA also conducted weekly coaching meeting with the management team to track progress relative to the established plan.

Result:
We helped the Company to reduce their operating expenses and increase revenue from existing customers to get the Company from a $1.5 million annual loss to cash-flow positive within 60 days. This allowed the Company to accumulate cash, regain the support and confidence of its lender, and renegotiate the terms of its credit agreement and eliminate its current default. By focusing its efforts and resources on fewer – but more critical – initiatives, the Company was able to return to operating profitably and accomplish its strategic goals.

Creative Deal Structure Nets 60% Higher Value

Client Profile:
Diversified Public Company

Situation:
Company looking to divest non–strategic business unit in order to raise cash and focus on core business units. This business held two key assets, but no prospective buyers were willing to ascribe meaningful value to both assets.

Solution:
DCA packaged the business as two separate business segments and sold each segment to two separate buyers. DCA also negotiated the terms of joint use of certain shared assets between the two new owners.

Result:
Increased Purchase Value by over 60% above maximum purchase price offered by any single purchaser for the combined business.

The 7–Day Deal

Client Profile:
Private Internet Services Company

Stiuation:
Seeking DCA’s counsel, the Company contacted us one Friday concerned that it was not going to meet payroll the following Friday.
They asked DCA if there was anything we could do to help them save the Company.

Solution:
Later that same day, we introduced the Company to a strategic acquiror that we thought should be able to leverage the client’s customer base, technology and personnel.

Result:
Working through the week, the parties were able to negotiate terms of the deal, document the transaction, complete limited due diligence with expanded representations and warranties, and actually closed the deal the following Friday, allowing the Company to fund that day’s payroll. Total elapsed time from introduction to closing…7 days.

Strategic Acquiror Saves Troubled Company

Client Profile:
Private Manufacturing Company

Stiuation:
The Company was reasonably successful, growing 100% per year for each of the past 3 years, but had recently made several poor—and expensive—decisions. As a result, they were insolvent and faced losing their Workers’ Comp insurance within 2 weeks. They also had a sizable Payroll Tax Deposit to make at the same time. The owner contacted DCA at this point uncertain as to what he should do.

Solution:
DCA put together a Business Opportunity Summary and coached the CEO on what to do in order to attract and select a strategic acquirer. We also coached him on what the profile of a likely strategic acquirer (who would be willing to move quickly) would look like.

Result:
With DCA’s assistance, the CEO was able to identify an ideal strategic acquiror who purchased 51% of the business, made the Workers’ Comp payment, relieved the former owner of all personal guarantees on the Company’s obligations, and provided an ideal platform for future growth. The post-merger Company has grown nicely, and the CEO remains active in the business.

The Perfect Storm: Operational and
Financial Issues at the Same Time

Client Profile:
Private Manufacturing and Distribution Company

Stiuation:
The Company had put itself into a difficult financial position due to product quality issues and some unsuccessful new product introductions. As a result, the Company was insolvent and had to resolve both operational issues and financial issues concurrently. The Company hired a DCA Principal to come in and orchestrate the turnaround.

Solution:
DCA’s Principal stepped in and focused initially on resolving the product defect issues and restoring its customers’ faith and confidence in the Company. Once that was accomplished, DCA helped the firm raise a small private placement to serve as a bridge until the Company could raise enough capital to return themselves to solvency. As a part of this process, DCA facilitated a merger with a publicly traded “shell’ company, making the capital raising process much easier and less expensive.

Result:
The Company raised three additional rounds of debt and equity capital, established a dominant market position in their core product line, and diversified into other complementary businesses. Over the ensuing couple of years the Company was recognized by several organizations (Including the L.A. Times, Ernst & Young, and Business Week Magazine) as one of the fastest growing and most successful companies in the United States.

DCA Helps get Public Company Righted

Client Profile:
Publicly Traded Medical Device Company

Stiuation:
The Company was in the process of being sanctioned by the SEC for accounting irregularities and other improprieties related to some members of the management team. The Company had just been delisted from NASDAQ. The Board reached out to DCA to have one of DCA’s Principals join the Board of directors to get the company back into compliance with the SEC and relisted on NASDAQ.

Solution:
A DCA Principal joined the Board and worked to improve corporate governance, compliance, and reporting transparency. He also was appointed as an Audit Committee Financial Expert as well as a member of the Compensation Committee and Special Committee dealing with the SEC investigation. In addition, the DCA representative assumed the role of negotiating the ultimate separation between the Company and its CEO, as well as the appointment of a new CEO.

Result:
The Company’s saw its stock price increase from $2 per share when DCA got involved to $40 per share when DCA’s involvement concluded. During this time, the Company improved its operating performance, increased transparency, terminated and replaced its CEO, settled all issues with the SEC and regained its listing with NASDAQ. The Company was ultimately acquired by a large European company, resulting in one of most successful turnarounds of its era.

My Business Model has to Change – Help!

Client Profile:
Privately Held Retail Services Company

Stiuation:
A slowing economy, the housing crash, and decreasing consumer discretionary spending were having a significant impact on the Company’s ability to grow and caused the Company to experience an increasingly difficult time finding the capital and personnel to continue its geographic expansion by opening new stores.

Solution:
DCA first evaluated cash flow from current and projected revenues resulting in a recommendation to restructure the Company’s cost structure to reflect the new, lower revenue reality. Recommendations also included consolidation of buying functions and inventory management, reducing headcount, renegotiating real estate leases, selling stores in remote locations and closing unprofitable stores. Finally, DCA worked with management to leverage the Company’s reputation and legacy video library to create a new business model based on recurring, monthly subscription revenues. The new software-as-a-service model focused on developing and distributing on-line educational materials, a marketing system, and customer relationship management system that would allow independent store owners to teach their customer service representatives to become more effective in dealing with their customers, accelerate the acquisition of new customers, and better manage the customers’ relationships with the stores.\

Result:
The Company has achieved positive cash flow from operations ensuring that it is the master of its future and destiny. It has also launched the new product to significant acclaim within its industry and anticipates significant, profitable growth over the next several years positioning it well as an attractive partner or acquisition candidate.

Who is on First????? What is on Second?????

Client Profile:
Privately Held Professional Services Company

Situation:
The Company had for years operated as an egalitarian collection of partners. In an effort to grow through acquisitions, it discovered that other companies were organized in a more formal, traditional hierarchy which separated management responsibilities and authority from mere share ownership. In order to adopt best practices related to corporate governance, become more competitive and attractive to potential partners, the Company decided to reorganize itself and its approach to governance.

Solution:
DCA reviewed the Company’s organization structure, executive management and board of director roles and responsibilities, and accountability for operational and financial performance. It compared the Company with other companies in the same industry and surveyed current practices related to governance, board and executive management structure, roles, and responsibilities. It also evaluated and recommended changes to the Company’s compensation, bonuses, and shareholder distributions including the adoption of a new incentive stock option plan for employees.

Result:
The Company reorganized its board of directors formerly comprised of the eleven shareholders to a new board comprised of three inside directors and two independent directors. The new board is evaluating the Company’s organizational structure, management structure, and compensation policies. It is also revisiting the Company’s strategic plan including appropriate practice areas, growth opportunities, acquisitions, and liquidity strategy. Today the shareholders, employees, and directors know who is on first, what is on second, and how they are going to work together to get to third base.

STRATEGIC ADVISORY | PRIVATE EQUITY | RESTRUCTURING | TEAM | CASE STUDIES
CONTACT | HOME