Growth Capitol
Privately Owned Business Seeking Growth Capital and Exit for Retiring Owners
Issue: How to fund the business for growth and provide owner’s retirement.
Approach:
- Analyze the strengths and weaknesses of the business
- Develop and implement a growth and capital plan
- Assume the position of Chief Financial Officer and lead the transition
A privately owned Tennessee company hired RLW as the chief financial officer to help prepare the company for eventual sale for the retiring owners. The company had a history of increased sales without a corresponding increase in earnings.
A 90 day plan was developed and executed. Following an industry wide slump, a further restructuring plan was developed and implemented, which included a profitability review based on contribution margin by customer and product.
A capital improvement program was instituted with a focus on providing additional products to the fifth ranked customer with the greatest growth potential. This plan achieved the desired results with increased sales pushing this customer to number one position and achieving record earnings. These earnings were reinvested into the business to reduce debt, buyback outstanding shares, and refinance the credit line. Additional capital improvements were funded for capacity increases buy related product lines. Other activities were restructured, unprofitable product lines disposed, and the balance sheet strengthened. This resulted in the negotiation and sale to a private equity firm at 9 times EBITDA. RLW was offered a senior position at the acquiring company.