The client for the interim mandate was a manufacturing service provider for electronic assemblies in small and medium series production for the transportation, measurement, medical and security technology sectors. The company had slipped deep into the red within a few months. The management tasked the interim manager with doing everything possible as interim CRO to ensure the company's continued existence.
Declining sales, reduced equity base and lack of liquidity
For the current financial year, sales figures were already declining from January compared to planning. The negative trend intensified in April and losses were increasingly generated due to costs. The order backlog had already been significantly reduced and incoming orders were well below the high target figures.
Despite this, the management remained very optimistic about the current year. The decline in turnover weakened the company's already reduced equity base and liquidity. In addition, a promissory note loan fell due in full in September, but this was not the focus of the management. It quickly became clear that repayment from current business was not possible.
Detailed analysis of all earnings-relevant factors developed
In a first step, the interim CRO prepared a detailed analysis of current business in order to be able to estimate the expected year-end result. To do this, he first reviewed the order backlog and customer projects. The interim manager also examined the possibility of reducing stocks of finished products and discussed the project pipeline of new customers intensively with the sales department. He also scrutinized the products in terms of margin and manufacturing costs.
In addition, the interim manager examined the organization, tasks and processes. He identified duplication of work and inefficiencies and identified potential for improvement. He also assessed the number of employees in the individual departments, their qualifications and the number of managers.
This resulted in a sales and margin plan for the next three years, which served as the basis for estimating the necessary cost savings. In mid-July, the budgeted profit and loss account for the current financial year was also finalized. This was based on the sales forecast for the current financial year and the extrapolation of personnel and material costs. A clearly negative result was expected.
Holistic restructuring concept developed for complex situation
In the second step, the interim CRO drew up a holistic restructuring concept that had to fulfill several requirements.
- The financing banks demanded a sustainable solution in order to be able to accompany the company on its future path. This required a profit in the following year with a liquidity plan that ensured all liabilities and also the repayment of the bullet loan over a longer term.
- Massive cost savings were necessary - especially in the area of personnel.
- The savings had to be designed in such a way that the company would once again have a basis for growth and increasing profitability.
- The implementation of all measures had to be very quick and efficient in order to prevent the risk of insolvency due to illiquidity or over-indebtedness.
- The restructuring concept was only possible with the current financing partners and the current credit lines, as an increase in equity and debt capital was virtually impossible due to the company's critical situation.
Reduction in personnel costs requires massive staff cuts
The restructuring concept included cost savings of around 26% of running costs. The reduction in personnel costs was achieved through the mass redundancy of 57 of the 147 employees. At the same time, the organization was significantly streamlined and geared towards efficiency. The new organization had already been developed and broken down into employee names. The implementation required a reconciliation of interests and a social plan, which had to be negotiated and concluded with the works council. The contracts were signed at the beginning of September.
Strategic realignment of the company supports the restructuring
Parallel to the restructuring steps described above, the interim manager provided intensive support for the strategic realignment of the company. The identification of new customer segments, added value through engineering services, the utilization of production capacity through more flexible offer calculation and the expansion of the product range through in-house products were some of the building blocks of the changed strategy and sales efforts.
The introduction of new management tools such as a rolling forecast over 13 months for incoming orders, sales and EBIT made a further contribution to the restructuring. The establishment of a project pipeline in sales and the precise analysis of cash flow and other key performance indicators formed further pillars of the restructuring.
Bank confidence successfully restored
From the start of the project, the interim manager and the management were in intensive discussions with the financing banks. Due to the management's unrealistic assessments, lost trust had to be restored. The interim manager made a significant contribution to this by providing the banks with the projected results for the current and next three financial years, including financial and liquidity planning, as early as mid-July. These projections documented the return to profitability.
The banks' representatives had no doubts about the company's will. However, they saw the implementation of the restructuring concept as hardly realistic in the short time available. Nevertheless, they trusted the interim manager's figures. In the event that the restructuring could be implemented in the short time available, they would continue to support the company. However, the prerequisite would be the agreement of all financing partners involved in the bank meeting.
Company successfully on the market 3 years after restructuring
In September, after approx. 3 months of the interim manager's work, the banks approved the restructuring concept and the company was able to continue. The restructuring was successful. The target figures for the following years were exceeded, especially in terms of profitability. After 3 years, the company recorded a significant increase in profits and had roughly the same number of employees as before the restructuring.
