Case Studies demonstrating how executives have contributed to successful exits

Having just completed a three year stint as interim turnaround FD of a £400m iconic leisure business PILOT's interim FD thought this one would be a brief walk in the park...

Private equity backed and FSA regulated, the group offered outsourcing solutions in general insurance to leading insurers, financial institutions and corporates, from seven locations with 600 staff.

Initially the task was to spend a few days to review the adequacy of financial management and reporting. This led to supporting the board in the development of a new business plan which would support a significant new fundraising from third parties and/or self sufficiency should the fundraising be unsuccessful.

The review also uncovered serious management malpractice so the interim FD was then the only man left standing and was tasked with implementing this turnaround plan. Prior year loss of £10m turned into operating profit and positive cash flow within six months. This was achieved through:

• renegotiation or cancellation of loss making contracts;
• closure of loss making subsidiary and developing a new operating model for another subsidiary;
  
• re-engineering of business processes and significant headcount reductions.

However, substantial legacy liabilities were then discovered forcing much of the group into administration. Further investment was made by the private equity fund to repurchase the profitable operations via a pre-pack. A new group was formed with the interim becoming semi-permanent (by now) CEO.

• Parts of the previous group's central services and IT infrastructure were purchased;
• Key staff were rehired and head office functions rebuilt (finance, HR, IT, compliance);
  
• Client contracts were renegotiated (not one client contract was lost).

With the group stabilised, profitable and cash generative, the private equity fund decided to realise their investment. After extensive due diligence the group was sold to an overseas investor delivering a fivefold return. The 'interim' CEO mentored the COO to take over as CEO.

And the moral of this one?...interim executives should never take a turnaround assignment at face value – the job will nearly always turn out be radically different to the way it was described at the initial interview (not PILOTpartners' fault...honest...)

And...when is an interim assignment a permanent job by another name? (No answer to that one yet...)

Global compressor manufacturer, MBO bought for £1, sold to US corporation for £204m. Turnover £260m, PBT £18m.

An extraordinary six year turnaround by a well known management team in which the interim divisional MD assumed the key operational role. Annual losses of £20m converted into profit of £18m. This industrial division represented 75% of CompAir's worldwide business.

Ultimately the turnaround and successful exit was down to management, sales development, cost reduction and production efficiencies on an international scale...supported by a visionary stressed investor...

• Led radical and industry leading product development programme to create world class portfolio;
  
• Regained lost market share in European territories and grew new territories in East, Asia and North America;
  
• Rapid aftermarket growth through focused re-capture programme and enhanced direct service business model;
  
• Low cost sourcing to over 40% within 3 years; setup Chinese sourcing company;
  
• Loss making businesses and product sectors eliminated;
  
• Improved manufacturing efficiency through consolidation of capacity into Germany and China;
  
• Initial tasks in UK division: sold off 17 acre 'brown field' site; closed down facility resulting in 200 redundancies and transferred business to German subsidiary; disposed of all redundant stock and plant.

An object lesson for all investors and management teams who can't see their way through an intractable mess...

In this case it is interesting to note the role played by the interim FD in a failing mail order and internet fashion retailer where the management team all round him seemed to be hell bent on losing their heads...

This is a high quality Italian ladies fashion business, with gross turnover of £30m and 120 employees operating through its core iconic brands.

Working with the private equity owner and the bank's workout team, the role involved positioning the business for sale whilst ensuring that it traded profitably and generated cash throughout the process.

Given the disarray he found upon joining, it is not surprising that the interim FD took control of the warehouse and logistics function, IT as well as the finance team.

He led the sale process, commissioned PwC to produce the sale brochure, handled all the due diligence from prospective buyers and led sales presentations. Resulting in:

• A successful sale achieved within very tight timescales laid down by the private equity fund;
  
• Introduced revised commercial metrics into the business to reflect the growth required from internet retailing;
  
• Produced a fully integrated 3 year business plan and cash flows.

Interim FDs are not merely the stewards of the cash book and purveyors of impenetrable reports to stakeholders...they understand the dynamics of a failing business outside the finance function and manage short term plans to improve and stabilise it so that an exit is optimised.