Over several years, a financial investor had acquired a group of seven companies in the lighting industry, including six manufacturing companies in Germany, China and the Czech Republic as well as a sales company in France. With 370 employees and a turnover of 45 million euros, the group generated a loss of twelve million euros.
The current interim manager was hired as CEO to restructure the group. At the end of the consolidation phase after 18 months, two companies were sold. The production of four companies was consolidated at one location and in a newly founded company, and one company was taken over by the new company. In the first short financial year (May to December) following the restructuring, the new company achieved a balanced operating result with 74 employees and a turnover of eight million euros.
Numerous acquisitions of financially weak companies in the lighting industry
The core of the original investment was the purchase of a manufacturer in Braunschweig that focused on the development and production of lighting solutions for the medical sector with deep in-house value creation. With the aim of establishing a competitive provider of B2B lighting solutions, this company acquired several companies in the lighting industry. These included a manufacturer of street, outdoor and railroad lighting as well as a provider of professional indoor lighting for industry, logistics and retail. All of these companies had got into financial difficulties for similar reasons: inefficient production spread across several locations - some of them abroad -, sprawling product ranges, a lack of innovation (e.g. LEDs), outdated IT systems, a lack of controlling and often a demotivated workforce.
Group of companies taken over as CEO in an almost hopeless situation
The group generated a turnover of 45 million euros with a deficit of twelve million euros at the time. Without a regular injection of liquidity from the shareholder, the financial investor, the group was unable to survive. The acquisitions had not been consolidated. Each company maintained all functional areas relevant to its operations, such as development, production, sales, administration and marketing. None of the companies were profitable or cash-positive. There was no common strategy.
In addition, responsibility for the group changed hands at the financial investor. The new manager immediately decided to replace the previous CEO. In November, the interim manager - at the time in a permanent position - took over the group of companies, which was in an almost hopeless situation.
Transparency established in liquidity planning, KPIs and working capital
Quick action was required as liquidity was lacking and the banks still on board and the workforce were extremely nervous. One of the first measures was to recruit a CFO with overarching responsibility. The CFO immediately converted the liquidity planning to a daily basis and determined the profitability of the various business areas. Meaningful key performance indicators and the presentation of working capital, including banks, shareholders, customers, service providers and suppliers, created transparency about the current situation and revealed initial starting points.
In the next step, the CEO centralized management by terminating the locally based managing directors. From then on, he discussed all relevant decisions directly with the division and department heads remaining in the companies. In intensive one-to-one discussions and staff meetings, it was possible to quickly gain a detailed overview, inform the workforce transparently about the status quo and thus create trust.
New strategy developed for promising areas in the lighting market
The analysis had shown that the divisions could be continued in their existing form. While areas such as professional outdoor lighting, interior lighting and railroad lighting were viable for the future, taking into account and implementing massive changes, there were no viable future prospects for the medical technology lighting division. After consulting with all stakeholders, the decision was made to transform the Group into a system provider for professional lighting solutions for the municipal, private and railroad markets.
The implementation plan provided for the following steps:
- Consolidation of the locations with the aim of concentrating on one location in Germany and retaining the location in Budweis in the Czech Republic
- Establishment of a central organization with the areas of development, administration, purchasing, work preparation, product marketing and sales
- Sale of the company holdings that did not fit in with the new strategy to external investors
- Development of an implementation and investment plan for the next twelve months.
Setback due to investor withdrawal - insolvency filed under self-administration
In the course of the restructuring, an unexpected setback occurred. The shareholder announced that it was no longer in a position to provide the liquidity required for the restructuring. Convinced of the company's future viability, the company's management team therefore decided to complete the restructuring through self-administered insolvency. After intensive preliminary discussions with lawyers and other specialists, all German companies then filed for self-administered insolvencies, which were approved by the relevant insolvency courts.
In the following months, the locations in Germany and abroad were wound up in the course of the insolvencies. The CEO consolidated fixed and current assets as well as parts of production at the new central location in Laatzen. At the same time, an official sales process began for the newly created organization, in which all outdoor, indoor and railroad lighting activities were bundled, as well as the medical technology business in Braunschweig. There were a large number of interested parties for both areas.
Successful sale of a division and the newly formed company as a whole
The medical technology business was successfully sold to a strategic investor from Austria. The newly created business for outdoor, indoor and railroad lighting in Laatzen was sold to an investor from Hamburg. The newly founded company started at the Laatzen site with 74 employees. Within the short financial year (May-December), a balanced EBITDA was achieved with sales of eight million euros.
