Distributor of HVAC equipment. Revenues $30 million, down from $47 million. $6 million debt. Owner leveraged company to buy out family members at height of market. Vendor representing 70% of the business also a secured lender in the inventory.
- Effort to maintain revenues resulted in increased credit risk, slow pay and many customers eventually going out of business.
- Inventory held at historically high levels even in face of revenue declines.
- Buyout of family members allowed sales and marketing functions to languish.
- Bank’s $10 million note was deemed to be at significant risk.
- Owner removed from day-to-day decision making and MorrisAnderson installed as CRO to help management.
- Forbearance agreement with Senior Lender.
- Aggressive, market-oriented inventory management system put in place.
- Implemented professional sales and marketing program.
- Installed professional collections procedures and policies.
- Senior Lender and key vendors supported turnaround process.
- Inventory rationalization reduced inventory by 35% in four months at no margin loss.
- Professional marketing and sale performance grew the customer base in a direction of more professional, faster growing customers.
- Lender paid down $7.4 million versus initial recovery estimate of $4.5 million.