CVA Case Study Interim management and new capital manufacturer

14 November 2013

£3m sales

A venture capital company approached us to look at this group of businesses in the manufacturing sector. They had funded a MBI some 21 months earlier and were worried that the business was facing serious cashflow problems and they could not obtain enough information from the FD.

The previous accounts were showing losses but not on the scale that we uncovered when we were appointed by the shareholders to review the company. Our initial review was that one of the two manufacturing companies was a lost cause and needed to close, the second was a good business that had been dragged down by poor management and the other failing business.

Of the 4 directors only one was driven and worth keeping the others had decided they did not have the stomach for the rescue and recovery period. We were appointed to run the company, reorganise it, and put in place a deal with the secured creditors and the unsecured creditors.

Whilst doing this we also replaced the FD and accounting functions with a good debtor book the shareholders and the MD thought a CVA unnecessary. But on closer inspection the debtor book was full of holes and the invoice discounter was over advancing by over £100,000.

We brought in 4 people to purge the book and get it brought up to date. We reported to the bank/discounter daily to ensure that they were well informed as to the cashflow requirements and over 6 weeks we traded the company out of a situation where administration looked all but inevitable.

Once the numbers stacked up we commenced with a CVA proposal and got the debts restructured. With our new financial controls in place we stepped down form the day to day rescue management and returned control to the MD.

After the CVA was approved the company needed further funding and the original VC plus some new investors introduced by KSA put in a further £100,000.

The business was subsequently acquired by a major competitor in 2006.

Categories: CVA