Precision Stamping Manufacturer

Situation

Our client manufactured precision stamped components, with extensive business in the auto industry as well as other key industrial sectors. Created from a roll-up of several companies in the late 1990s, the company operated three plants. In late 2002, the company consolidated its Massachusetts operation into its Michigan and New York facilities to reduce overhead and improve operational synergies.
The consolidation was more difficult than anticipated and several problems developed. There was substantial management turnover in the process, depleting the company of critical skills during the transition. As a result, operations were adversely impacted. On-time delivery dropped below 80% with defect parts per million (PPM) counts in the ten thousands. Substantial costs were incurred to minimize the impact on customers, but account relations were strained nonetheless. Significant cash losses persisted through June 2003, and trailing 12-month EBITDA was negative $3 million. The company failed to ramp down for the July automotive industry two-week shutdown, further straining cash and precipitating a liquidity crisis.

CRP’S Approach

CRP was engaged by equity sponsors as interim CEO and immediately stabilized day-to-day cash flow. New management was recruited to stabilize operations, returning on-time delivery to 98% and defective PPMs (parts per million) to single digits. CRP eliminated the corporate overhead structure, saving significant annual expense while returning the plants to autonomous control. CRP prepared a review of strategic alternatives and determined that highest value could be achieved by selling to a strategic buyer. CRP led the marketing effort of the company and retained an investment bank to expedite the sale.

Results

• EBITDA was restored to a positive $3 million annual run rate in four months, which prepared the company for sale.
• CRP’s initiatives saved $2 million in annual expense and returned the plants to autonomous control.
• Cost structure was returned to pre-consolidation levels with 30% more volume.
• Variable margin improved from 22% to 28%.
• The company returned to profitability and positive cash flow.
• The company was sold through a 363 sale in Chapter 11 in only 38 days for four times forward-looking EBITDA, a 60% premium above liquidation value.