Northeast Sign Manufacturer CVA Case Study

5 June 2012

Sales £9m; Staff 170; MBO with a history of loss making

KSA was invited to help this old established business in the north by the chairman representing a large venture capital company. A management buy out had been conducted some years earlier but profits had not been delivered. Losses were placing cashflow pressure on the board and a new MD had been introduced by the VC company some 12 months earlier.

Due to the divisions within the company he was unable to drive change quickly enough to allow the company to survive. Over 300 creditors were putting enormous strain on the directors and a number of the team were not performing. The Inland Revenue was seeking to take action to recover its arrears and a bailiff had taken walking possession.

KSA organised a CVA led restructuring of the balance sheet including some debt forgiveness by the finance providers. Intense creditor pressure, including the threatened winding up action by the Inland Revenue, was efficiently removed quickly and the management team refocused on running the business.

KSA achieved full support from the creditors, helped remove two non-performing directors and introduced KSA Client Services managers to help replace them. Communication between departments was improved. A loss making division of the business was subcontracted outside the business thereby reducing costs and losses. A full review of company operations resulted in over 40 redundancies.

After a period of time it was apparent that problems were continuing at senior management level. The financial reporting was not to an acceptable level and the FD was causing day-to-day staff problems. A new finance director was introduced by KSA Client Services.

After 26 months of continuous losses the company is now profitable. KSA acts as a non-executive director to aid long-term growth and strategic development. The balance sheet is stronger now than at any time since the MBO.

Whilst the CVA was vital to stop the creditor "merry-go-round" the real changes that KSA delivered were at operational and senior management levels. 

Categories: CVA