CFO (Permanent and Interim) Services – Case Study
Targeted Solution: Serial Entrepreneur/Family Office Seeks CFO to Prepare Company for Sale
After hiring an investment bank and initiating a formal sale process, company ownership was forced to suspend discussions with interested parties due to industry headwinds, in combination with a faltering VP, Finance and an expensive but flawed international licensing deal. At the recommendation of the investment banker, ownership hired Scott Hales as CFO (permanent/full-time). The mission: To resolve not only the financial and operational shortcomings that hampered the pre-deal due diligence, but also to capitalize on the opportunities for margin expansion over the medium-term and prove out the growth and future investment returns available for a prospective buyer.
The work of Scott and the team in the ensuing 24 months focused on redirecting international expansion resources towards growth in a new domestic division – an adjacency that represented substantial new growth opportunities. This new activity broadened not only the service offering to the company’s existing customers and target market, but also the company’s appeal to many potential buyers. Other finance-led enhancements included: (i) significant overhead reductions and wind-down of satellite offices with negative contributions; (ii) a redesigned sales incentive program; (iii) investment in IT and digital assets; and, (iv) upgrading from an annual review to an audit process with a nationally recognized accounting firm.
Shortly after reengaging the investment banker – now armed with the supportable numbers and growth narrative – the company’s owners were presented with several attractive offers from multi-billion-dollar public companies and private equity-backed entities alike. Scott led the owners and executive team through the critical presentation phase, and ensured that every aspect of the due diligence process was delivered accurately and efficiently. Following the successful (achieving the owners’ ambitious valuation target) transaction’s closing, Scott spent the next year integrating the target’s operations as financial executive/head of the buyer’s North American operations.
Special Situations – Case Study
Targeted Solution: Stop the Cash Burn — Recapitalize, and Exit
Even with the bankruptcy filing of this company’s major customer, management still believed there was a viable future with the remaining client base, as well as the growing revenues from a new division. When the (previously inactive) majority shareholder of this $90MM (revenue) company finally got involved, it was to replace the bank with a multi-million-dollar lifeline (loan) to bridge the company’s operations to a return to profitability.
Upon learning that the (now ‘unbankable’) company was burning through cash at a much greater rate than before, and that more realistic demand projections were not at a level sufficient for the company to operate independently over the medium-term, the majority shareholder hired Scott Hales as CFO to replace the incumbent finance and accounting executives. The primary objectives for Scott were twofold: (1) right-size the cost base for pro forma profitability; and, (2) obtain the highest price for the tangible and intangible asset values during the niche sector’s rapid consolidation (i.e., cyclical contraction and resultant shake-out) – while that window was still open.
With more critical fixes needed than the time and working capital to fund them, Scott began by bringing in an asset-based lender to secure enough ‘dry powder’ to fund the approximately 90-day timeline required to stabilize and divest the three operating entities. Additionally, he temporarily (and affordably) plugged the holes in the essential management roster with the support of two talented accounting and human capital experts from the MVP network. To ensure the proper ‘exit architecture’ for a smoother and prompt sale, several other measures were implemented in a matter of weeks – each with its own seven-figure positive valuation impact: (a) consolidate office and production facilities across two states, moving to a single site; (b) accounting for, and negotiating the assumption of, multiple union liabilities; (c) collaborate with multiple law firms to perfect the large trade claim with the customer bankruptcy trustee, as well as the disposition of a variety of other legal liabilities and threats; (d) quickly root out all legacy fiscal irresponsibility, including cross-border tax and benefits programs largesse; and, (e) motivate/retain key employees to transition to the new buyer organization.
Managing the key terms and details (with company counsel, et al.) – due diligence, data room, and deal documentation – were Scott’s final steps in delivering to his employer the desired exit with optimized economics.