Turnaround Allows Owner Comfort to Inject New Money

Industry: Healthcare

AccuMed

Buffalo, New York

Challenge

Medical Device Manufacturer. $40 million sales. $20 million debt.


  • Company had sold a division to a customer reducing sales and EBITDA
  • Profits from Sale went to pay owners, taxes and reduce a minimal amount of debt
  • New Business was slow in replacing lost sales
  • New Customer would require $4 million of new Capital and $2 million of increased Revolver Availability
  • With sale of division, revenue decreased by 40% and EBITDA by 60%.
  • Company was distracted by sale and new Business launches were delayed
  • Company Gross Margin was decreasing
  • New Business was would require additional capital and increase to Revolver for assets located in the Dominican Republic
  • Company had broken a covenant and bank was concerned about increasing exposure
  • Liquidity was a challenge as A/R had grown and A/P was stretched

Solution

  • MorrisAndersonworked with management to develop a restructuring plan
  • Margin erosion had been isolated to 2 new product launches, but solutions were not being provided. Partnered with management to improve production process and reduce costs
  • Created a robust model that provided multiple scenarios regarding new business to show profitability and working capital requirements
  • Helped company negotiate a loan modification agreement that prevented bank from calling loans and gave comfort to investors to invest additional capital.

Results

  • New Capital of $4 million was provided by ownership group
  • Bank allowed company to seek alternative funding for some equipment
  • Company and Bank were able to easily understand the potential financial impact of the new business and access risk
  • A/R decreased as company negotiated a large settlement with a customer and A/P was brought into acceptable terms
  • New product lines improved profitability and EBITDA increased back to historical levels
  • New Business Project was given green light to proceed