A once very successful medium-sized company for microelectronics and embedded software had become increasingly financially unstable. With an annual turnover of EUR 6 million, it generated a loss of EUR 1.2 million within three years. The long-standing sole managing director and co-partner finally threw in the towel at the end of 2018. The interim manager was then appointed by the shareholders' meeting to take over the management for six months and avert insolvency.
Acute risk of insolvency after investments in unsuccessful products
The factors behind the crisis included years of increased price pressure on the services offered, the increasingly low completion rate and the resulting overcapacity. The four-person management team had initially used the excess capacity to develop two new products in order to reduce dependence on services. However, revenue from the new developments fell well short of expectations and this ultimately led to an acute risk of insolvency.
The interim manager began the mandate at the beginning of January 2019 by holding in-depth discussions with the management and key executives as well as department and team leaders to gain a comprehensive picture of the current situation.
Renegotiating with customers and suppliers reduces costs and increases revenue
The first and most important area of action he identified was the company's liquidity position. Within a few days, he reviewed and sorted all receivables and liabilities together with the commercial manager. In personal discussions with the most important customers and creditors, the interim manager initially succeeded in establishing a positive balance of incoming and outgoing payments.
The assessment of insolvency readiness was taken to heart at a very early stage and regularly documented in accordance with legal requirements. In particular, this included updating the assessment on a weekly basis in accordance with the guidelines of the Federal Court of Justice, according to which the company must provide clear evidence that any payment bottlenecks are only temporary and not permanent.
Business operations quickly stabilized and immediate risk of insolvency averted
In the next step, the interim manager reviewed all customer and supplier contracts. He identified a whole range of potential improvements, which he negotiated with customers and suppliers. As a result, over 70 contracts were adjusted or terminated. The savings in overheads alone amounted to more than 150,000 euros per year. By the end of the second quarter, business operations had already stabilized and the immediate threat of insolvency had been averted.
Shareholders convinced of realignment towards cloud-based solutions
During the mandate, the shareholders were looking for a new managing director, but had not found a suitable candidate by early summer. At this time, the interim manager presented his vision for the company at a shareholders' meeting. This included a reorientation of the offerings towards cloud-based solutions, accompanied by a change and a significant reduction in the workforce. The concept was approved by the shareholders and the interim manager was entrusted with its implementation.
Staff reduced from 70 to 40 employees without high costs
In the first year of his mission, the interim manager reduced the workforce to 40 employees - without mass redundancy notices and without significant severance payments. This was possible because the interim manager personally engaged intensively with all affected employees and actively supported them with outplacement. The interim manager also successfully supported the former managing director in his reorientation.
Reorientation of the company put into practice with the team
After the job cuts had created an essential prerequisite for the restructuring of the company, the interim manager began to align the company with cloud-based offerings. To this end, he launched a transformation initiative. This also included a "skills offensive" in which the team acquired new knowledge about cloud and AI-based technologies. Finally, the interim manager initiated a partnership with Microsoft to use their Azure platform for future cloud-based solutions. The interim manager was actively involved in identifying and developing potential new customers and personally concluded several new contracts.
The first EBIT-positive quarter after 9 months despite coronavirus
In the third quarter of 2020, the company reported a quarterly EBIT of 6% of revenue despite the negative impact of the coronavirus pandemic, thus ending its year-long downward trend. Management was handed over to the company's longstanding authorized signatory at the beginning of the fourth quarter. He had actively supported the transformation process and was prepared for the task by the interim manager during the joint collaboration.
