An established company that manufactured and sold specialized electric power systems to industrial customers had been a leader in its market segment but had experienced recent losses of $2.8 million and $5.2 million on $20 million in sales during the prior two years. Some of the issues involved a cost and pricing structure that was no longer competitive. A private equity firm bought a majority interest and brought in a team of executives to improve performance of this distressed company and return it to profitability.
One of the new executives was the CFO, now a E78 partner, who had a primary role in the improvement initiatives. After a comparison of costs and pricing of the company’s competitors as well as an analysis of internal controls and procedures, he launched the following initiatives:
- Right-sizing manufacturing and R&D, mostly by reducing organizational layers and headcount
- Repricing the company’s products and services
- Working with the sales team to revamp the marketing message
- Aggressive working capital management including shortening aging of receivables
- Pursuing strategic acquisitions and joint ventures to develop new business
The company returned to profitability within nine months. Once on a more solid footing for success, and with continued business development initiatives by the CFO and others, the company continued to grow so that the private equity owner was eventually able to sell its shares after eight years for $5.18 per share when it had purchased them originally for $0.17 per share.