Client profile: Premier logistics industry leader specializing in B2B as well as B2C domestic and international transportation. Founded in 1891 this organization grew from a domestic household goods mover to a premier multi platform international logistics organization with over $150 million in revenue. Over the past three years the company experienced cumulative losses of approximately $20 million. There were several factors that contributed to these losses. One area in particular was the dot com business. The company had spent a great deal of time developing systems and infrastructure to deliver goods from dot com companies to the home. This company was one of the only companies that could provide this service through their agent network. The company’s revenue grew quickly then, as the dot com boon faded, so did the companies revenues. As the companies revenues declined the agents concern grew to a point that they formulated an acquisition group.
Client goal: The acquisition group wanted to acquire the company and make it a fully agent owned business. They needed to avoid bankruptcy and protect their interest in the business.
Project approach: Facilitate the sale of the company before year-end to solidify the agents as owners and inject $3.2 million of equity into the company. Get control of cash by managing its own loan and collateral under the overall loan of the parent company.
Prepare financial budgets and operating analysis to ensure that the company was at least breaking even from a cash point of view and ensure that it would maintain a positive cash flow position going forward. Cash management tools needed to be implemented to tie the budget and track availability with the lending institution. A new operating philosophy was needed with respect to cash and how it was to be used. Past due debt was addressed by terming out, settling when appropriate and offering conversions to equity where appropriate. A new lender relationship needed to be created. New insurance carrier would be needed, one that would participate in a turnaround of this magnitude.
The Results: A realistic operating budget was prepared along with cash management tools. A strategy was then created for creditor calls and the foundation for a composition agreement was begun. After extensive negotiations by the Impact Group, the company was successfully sold to the agents on December 31st, 2001 to the group of 33 agents and management who formed the acquisition group. With the sale, the agents infused $3.2 million of cash and equity into the company to protect their unsecured liabilities and to make their “dream” come true. The Impact negotiations produced a reduction in the sale price of $10 million and gave the new company the ability to file 338H election under the tax code which in turn saved over $3.2 million in future tax benefits. All outstanding claims were settled or restructured and the companies liability insurance was underwritten. As a result of the work done by Impact, the company was able to avoid bankruptcy, protect the interest of the agents and obtain new financing. Additionally, through restructuring and cost reductions the company is profitable.
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