Scenario
A $100M+ 3-division defense and aerospace manufacturer had broken production, operations and accounting processes resulting in over $14M in losses. Individual divisions had no autonomy, and cash management was performed at the corporate level.
Additionally:
- Inventory turns were dangerously low, tying up critical cash resources
- Production management was haphazard
- Manufacturing overhead was ignored in costing calculations
- Government and commercial customers were severely fatigued from late deliveries
- Vendors were reducing shipments and refusing to ship critical manufacturing materials
- The company’s credit facility (secured with substantially all of the real property) was in technical default, and the senior lender was considering foreclosure proceedings
As a result, the financial sponsor was forced to take a $25M+ “mark to market” write-down.
Action Taken
BMP partners took on the CRO and CFO roles, and established new production management and processes, sold off excess inventory generating much needed cash flow, developed a manufacturing COGS forecast including forecasted purchases, renegotiated terms with fatigued vendors (obtaining 60-day terms in some instances), and returned all customer shipments to agreed-upon schedules.
Result
In one year, the company went from losing $14M in EBITDA to generating $5M+ in EBITDA. One division was sold, and the senior lender and financial sponsor were able to bring their entire investments back onto their balance sheets.
