Under Capitalised West Midlands Machine Tool Manufacturer

The Challenge

A well-regarded, 100-year-old West Midlands based engineering company, which had been acquired through an undercapitalised management buyout, faced a severe financial crisis. Although the company was profitable in its first year, its success was threatened by a large, two-year contract being unexpectedly compacted into nine months. This forced the management team to focus solely on delivery, leading to poor margins and a neglect of sales and marketing. The company experienced a subsequent sharp drop in sales, which triggered a critical cash flow crisis.

The Solution

RMT KSA was brought in to rescue the company. The solution involved use of a Company Voluntary Arrangement (CVA) to restructure and defer £600,000 of debt. To provide additional expertise, RMT KSA advisors were appointed to the companies’ management board. A new marketing plan to diversify the sales pipeline was implemented, as well as a restructuring of the management team being done – ultimately to help build a stable foundation for future growth. The directors also invested new capital into the business to support the turnaround.

The Results

The CVA successfully restructured the company’s debt, providing the necessary breathing room for the new strategies to take effect. The company’s sales book began to grow, with its new marketing approaches and a focus on new sectors leading to a sales level 16 times higher than in January 2002. Although the company experienced some initial losses after the CVA, it is now on a trajectory to achieve modest but sustainable profits, demonstrating a successful turnaround from the brink of failure.