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Case Study - Restructuring and Turnaround of Industrial Services Company


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Abraxas Group recently completed a successful restructuring and turnaround of a private equity backed middle market company. This engagement again highlights the value of our focus on transformational leadership.

The company, an industrial services company with a nearly 40-year history, was successfully guided through an out-of-court restructuring and a dramatic turnaround was completed, with performance on track for a $6MM increase in EBITDA (YoY).

The speed and scope of this outcome, and the value creation that resulted, proves our market thesis that an empowered change agent can drive radical value creation in troubled companies.

Published in: Business
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Case Study - Restructuring and Turnaround of Industrial Services Company

  1. 1. Industrial Services Company Engagement Recap May 2018
  2. 2. Overview • In November 2017, the lenders of a struggling private equity backed industrial services company were weighing their options. • Numerous management teams had attempted to revitalize the company, but growth had stalled and the company’s financial sponsor was unwilling to continue funding operating losses. • Over the course of a 5 ½ month engagement, serving first as financial advisor and then as interim CFO, David Johnson of Abraxas Group played a key role in revitalizing the company. Abraxas Group LLC 2
  3. 3. Rapid and Dramatic Improvement Abraxas Group LLC 4 Q1 Results Showcased Robust YoY Improvement EBITDA • EBITDA increase of >300% • EBITDA margin improvement of 689bps Cost Structure • Identified and implemented cost cuts equal to 12% of revenue • Targeted cost cuts fully identified and largely implemented by the end of Q1 18 In addition to the robust improvement in the company’s profitability profile, the radical shift in cost structure was achieved during a seasonal slow period and implemented in a capital efficient manner.
  4. 4. Key Areas of Contribution Worked in concert with executive team to develop and implement an actionable turnaround plan for 2018 Cash Management Implemented intensive cash management, maintained rolling 13-week cash flow forecasts, and supported the business during a seasonal slow period while minimizing incremental funding need Reports & Forecasting Supported Executive team in the development and rollout of a robust management reporting framework, as well as refining management forecast and extending to a full 5- year period Team Development Upgraded the Finance Department through staff development and recruitment of outside talent, including successor leadership Abraxas Group played a key role in driving considerable value Abraxas Group LLC 5 Plan
  5. 5. A third-party valuation analysis indicates that the turnaround generated substantial value since the close of the out-of-court restructuring in December. This increase in valuation highlights the extraordinary returns that can be achieved in a successful turnaround. Major value drivers: • Gross margin expansion • Cost structure rationalization • Working capital improvement • Sightline to a growth strategy Value Creation 12/22/17 Enterprise Value 4/20/18 Enterprise Value Abraxas Group LLC 6 > 75% Increase in Enterprise Value
  6. 6. David Johnson Email: Ph: 312-505-7238 David Johnson, founder and managing partner of Abraxas Group, has a 20-year track record of driving organizational change. David has served as an interim executive or financial advisor to dozens of middle market companies in turnaround and restructuring situations. Throughout his career, David has demonstrated a commitment to thought leadership, with numerous speaking engagements and articles on the topics of change management, performance improvement, restructuring, turnaround, and value creation to his credit. David received his MBA from the University of Chicago and completed his undergraduate studies at Fairleigh Dickinson University. Abraxas Group LLC 7
  7. 7. Chief Restructuring Officer • Implemented changes generating a 16% proforma increase in EBITDA • Successfully restructured $2MM in critical vendor payables Interim COO Interim CFO / VP Finance • Developed and led turnaround plan that generated a 6x YoY increase in EBITDA • Identified and implemented cost savings opportunities exceeding 13% of operating budget • 230% YoY increase in comparable period EBITDA • Settled $7.5 million in trade payables at a 32% recovery rate (resulting in savings of $5MM for client) Interim Executive Experience Abraxas Group LLC 8 An experienced and versatile Interim Executive David Johnson has been successful adding value in a number of interim executive roles,