Turnaround Salvages Value for Owners
Hobie Cat, San Diego California
Kayak and watersports manufacturer with two international operations. $60 million in annual sales. $24 million in bank debt. $16 million in subordinated owner’s debt.
- Dissent between two ownership groups and consecutive years of losses resulted in a lender loan exit decision.
- Weak financial reporting and accounting controls.
- High-cost manufacturing operations.
- Governance dispute between two ownership groups.
- Company had been previously marketed for sale which resulted in low ball offer from only one bidder.
- MorrisAnderson appointed as an independent director and chairman of the board as well as financial advisor, and investment banker.
- Developed profit improvement plan expected to achieve an estimated $7 million of annual EBITDA improvement including: price increases, RIFs, strategic outsourcing, re-sourcing of Chinese vendors, new product launches, sales channel expansion including launch of E-commerce platform.
- Cleaned up years of sloppy accounting, inventory valuation, and financial reporting.
- Initiated sale process marketing the Company to over 100 strategic and financial buyers.
- Financial results improved from $200K monthly loss to $300K monthly profit. Borrowing availability increased by $3 million through reduced inventory and accounts receivable levels.
- Successful marketing resulted in 5 LOIs for the purchase of the Company.
- Auction process successfully generated a final buyer who fully paid all debt and liabilities and a $15 million value increase from the prior purchase offer.