Components Manufacturer Suffering From Cut Price Competitors

The Challenge

A successful engineering company near Birmingham, with world-class manufacturing facilities, began to struggle due to a combination of factors. Aggressive undercutting by Asian manufacturers hit its prices hard. The owners, who had been focused on other business ventures, took their eye off the ball, which led to a series of setbacks, including a bad debt and the loss of a major contract. The company’s situation was exacerbated by the fact that its sole steel supplier in Europe was also its creditor, creating a critical vulnerability. The company was rapidly running out of cash and needed a comprehensive plan to suspend debt, cut costs, and regain the trust of its customers and the wider market. The owners were also looking to exit the business, adding another layer of complexity to the rescue effort.

The Solution

The company engaged KSA, with Gordon Boden and Keith Steven brought in to assess the situation. They developed a multi-faceted rescue plan that centered on a Company Voluntary Arrangement (CVA). The CVA was designed to contain pressure from creditors, particularly the steel supplier. The plan involved a number of strategic actions: the company sold off some of its property, cut its workforce by around 20%, and sought to persuade its sole steel supplier to continue providing materials on a pro forma basis. KSA met with the German steel supplier and successfully negotiated terms. They also met with Lloyds TSB to gain the bank’s support for the plan, which was crucial for its success. The CVA was the core mechanism that would formalize these changes and allow the business to survive and be positioned for a trade sale.

The Results

The CVA proposal was a great success, receiving an overwhelming **99% acceptance** from creditors. This provided the company with the legal framework it needed to implement its restructuring plan, including shedding costs and assets. Six months after the rescue plan was in place, KSA advised the company’s members on a successful trade sale to a London-based investor. The business is still performing well under its new ownership and has grown its sales back to around **£6 million**. The case demonstrates that a CVA can be a powerful tool not only for financial restructuring but also for facilitating a successful business sale under difficult circumstances. It highlights the importance of addressing key operational weaknesses, such as staff costs and property overheads, and the ability to win over key suppliers and lenders to ensure a company’s survival and a successful future.