Case Studies

Situation

• Expanded by acquiring 60 more tractors and 120 additional trailers. 
• Financed power units with bank debt and financed trailers with leases. 
• Added more fixed costs with maintenance shop lease and equipment, and personnel for administrative, customer service, and maintenance.
• Growth acquisition was slow and costly, and much lower margins than projected with management’s strategy. Actual results were significantly underperforming forecasts.
• Defaulted on financial covenants, cash was near exhaustion. Bank lender funded additional capital in hopes of turnaround.  
• Management’s actions were failing; drivers were leaving, utilization was declining. 
• EBITDA turned negative and cash was again near exhaustion. Debt holders’ collateral was perceived to be insufficient coverage. 
• The lender stipulated the company to engage a turnaround consultant. 

Consultant’s Actions

1. First 4 weeks: Improved cash flow by discontinuing unprofitable lanes, reducing headcount, and working down parts inventory and AR. Sold surplus tractors and turned in excess trailers to lessor. Restructured operations. Developed plan and submitted to lender. 
2. Second 4 weeks: entered into discussions with several investors and strategic buyers. Investors impressed with turnaround and forward prospects but still overleveraged. Reached agreement with lender to sell assets in conjunction with certain concessions.
3. Third 4 weeks: Quickly narrowed field of prospects, entered into LOI in week 10 and closed on the sale in week 12. The asset purchase agreement included assignment of leases and a 60-day Transition Services Agreement that helped fund the Company’s wind-down costs. Most of the employees would be hired by the new owner.

Outcome

• The sale closed 90 days after consultant was engaged. 
• Proceeds from the sale exceeded NOLV; the lender recovered more than reserved. 
• All parties avoided negative publicity that a court action would have amplified.

Situation

• Family-owned second-generation company was losing $8 million annually.
• The equipment lessors had started repossessing power units.
• Suppliers were cancelling credit terms, demanding prepayment and cash deposits.
• The company had not produced any plan to turnaround the business.
• The bank lender stipulated the company engage a turnaround consultant and to immediately begin a process to refinance the lender.

Consultant's Actions

1. Assessed the company’s equipment, fleet utilization, drivers, maintenance facilities, G&A resources, market coverage, and pricing. 
2. Developed plan to reduce service area, reduce size of fleet, close one of the maintenance facilities, increase prices. 
3. Return unutilized equipment to lessors, 
4. Sold the now-closed maintenance facility.
5. Parallel to operations, ran a process to refinance the bank lender; closed on the refinancing within 60 days. 
6. Developed detailed financial and cash flow forecasts with key assumptions.
7. Develop cash forecast to provide partial payments to lessors to give turnaround plan time Presented out-of-court restructuring plan to the equipment lessors and new bank lender.

Outcome

• The equipment lessors would no longer support the company or its management; agreed to support an out-of-court sale. 
• The assets were sold to a strategic buyer, who retained the customers, drivers, and many of the employees.
• The replacement bank lender was adequately collateralized and not impaired by the sale process.

Situation

• Family-owned company was losing $4 million annually.
• Fleet equipment was owned, financed by bank debt. Maintenance facilities were leased.
• Appraisals indicated bank lender was significantly under-secured.
• CFO had resigned, the company had no leadership for reporting, analytics, costing, forecasting, etc. The company had not produced financial statements in four months.
• The bank lender stipulated the company engage a turnaround consultant.

Consultant's Actions

1. Assumed duties of the CFO, re-established the month-end closing process and caught up on financial reporting.
2. Assessed the company’s equipment, fleet utilization, lanes, drivers, maintenance facilities, G&A resources, and customer pricing. 
3. Developed plan to discontinue unprofitable contracts and close one of the leased maintenance facilities.
4. Negotiated significant increases in prices for retained contracts. 
5. Obtained new contracts with lanes complementary and synergistic to existing lanes.
6. Enhanced driver recruiting and retention programs.
7. Sold unutilized equipment. 
8. Developed detailed financial and cash flow forecasts with key assumptions.
9. Worked on options for bank lender to exit. 

Outcome

• The bank lender sold its debt to a private equity firm, who then provided capital to stabilize the business.
• The consultant worked collaboratively with the PEG to find and transition to new managers to run the business.