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Revitalizing a Company in 6 Months

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Turnaround and corporate revitalization initiatives are always team efforts. The success of these efforts, however, and the speed and magnitude of the change implemented, can be strongly impacted by selecting the right advisor.

In a recent, highly successful turnaround and restructuring of a Behavioral Healthcare company, Abraxas Group was able to employ its transformational leadership approach to rapidly drive measurable, lasting change.

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Revitalizing a Company in 6 Months

  1. 1. Revitalizing a Company in 6 Months September 2017
  2. 2. “Success is not final, failure is not fatal: it is the courage to continue that counts.” ‒ Winston Churchill Abraxas Group LLC 2
  3. 3. Overview • In March of 2017, a Behavioral Healthcare company in the Chicago metro area retained David Johnson of Abraxas Group as Interim Chief Operating Officer to a lead a turnaround and restructuring effort. • At the time, the company was facing a number of severe challenges, and there was considerable doubt among key stakeholders regarding the path forward. • At the conclusion of a six-month turnaround process, the company now has a strengthened financial position, renewed enthusiasm among stakeholders, and strategic clarity on the path forward. Abraxas Group LLC 3
  4. 4. Liquidity Borrowing capacity had been exhausted • Critical vendors were not being paid Operating Losses Organizational Silos Persistent losses were weakening the organization • A scarcity mentality had set in, deferring needed investments Management did not know how to work together • Blame was rampant, and an “us vs. them” mentality reigned Day 1 Challenges Abraxas Group LLC 4
  5. 5. A number of steps were taken immediately to address this critical issue: 1) Cash Management. A rolling 13-week cash flow forecast was created, providing management with increased visibility. 2) Critical Vendor Negotiations. It was imperative that vendors understand how and when they would receive their money. 3) Turnaround Financing. Negotiations with the company’s incumbent lender began in the early weeks of the engagement. Liquidity Abraxas Group LLC 5 Source: Wikimedia
  6. 6. In recent years the company had experienced diseconomies of scale, as revenues increased, so did losses. No one was sure why. 1) Management Interviews. All members of the management team were interviewed. 2) Site Visits. The majority of the company’s sites were visited to assess operating realities. 3) Information Review. Financial and operational reports were reviewed, and insights shared in real-time with the executive leadership team. Operating Losses Abraxas Group LLC 6 Source: Wikimedia
  7. 7. While the management team had a great deal of talent and enthusiasm, the organization was heavily siloed, and cross-functional teams were largely unknown. 1) Implementation Teams. Cross-functional implementation teams were created to drive agreed-upon turnaround initiatives. 2) Shared Services. The Accounting, HR, and IT departments were reorganized to reflect a client-based, shared services mentality. 3) Metrics. A push toward more of a data-driven culture was launched. Organizational Silos Abraxas Group LLC 7 Source: Wikimedia
  8. 8. Results Liquidity • Negotiated a $10MM refinancing including $2.5MM of new money • Secured payment concessions on $4MM of critical vendor A/P Operating Losses • Developed a comprehensive turnaround plan that resulted in a 6x YoY increase in EBITDA • Secured unanimous board approval for plan Organizational Silos • Rolled out turnaround plan with a company-wide communication initiative featuring regular email updates and semi-regular townhall meetings Today the company has the financial resources needed to execute on its strategic initiatives, a rationalized cost structure, and a reenergized management team excited to execute on the new plan. Over the course of a 6-month turnaround, progress has been remarkable Abraxas Group LLC 8
  9. 9. David Johnson Email: david@abraxasgp.com Ph: 312-505-7238 Twitter: @TurnaroundDavid 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. David received his MBA from the University of Chicago and completed his undergraduate studies at Fairleigh Dickinson University. Speaking Engagements • “Radical Value Creation” • “Laying the Groundwork for Sustainable Growth” Publications • “Driving Value through Performance Improvement” • "The Turnaround Team: Understanding Advisors’ Roles in a Distressed Transaction" Abraxas Group LLC 9

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