Satellite Antenna Manufacturer

Situation Encountered Upon Engagement

A private equity firm acquired the satellite communications division from a publicly-held corporation. Under the publicly-held corporation, the division had suffered massive financial losses. For the fiscal year just ended prior to the acquisition, the division had an effective operating loss of over $20 million.

The new company inherited a myriad of problems, including low standard margins, high manufacturing variances, significant over-staffing, high salaries, overly generous benefits, an overly complex business model, too many locations, and poorly designed compensation systems. The division had experienced substantial market share decline in one of its four business units, was entering a cyclical downturn in another business unit and a third business unit was essentially a start-up that had been a severe cash drain. The new company did not have a manufacturing facility for its fourth business unit, having to buy product from the publicly-held corporation under an interim supply agreement which was set to expire one year from the acquisition date. The division had attempted to develop several new products without success and lacked the management processes to do so.  

Effective with the acquisition, the new company had no accounting, treasury, information systems or human resources functions, having to buy these services from the publicly-held corporation under a transition services agreement that was set to expire six month after the acquisition date.

Sues had been hired by the private equity firm to evaluate the division pre-acquisition, at which time he identified the various issues causing the losses. He was then hired post-acquisition to spearhead the process to turn around the company, manage cash and build the corporate infrastructure.

Major Actions Taken by Sues & Angart

  1. About a 30% reduction in the workforce was completed, totaling about a 140 FTE headcount reduction, with savings in salary and benefits exceeding $8 million annually.
  2. A comprehensive pricing and product line profitability review was completed resulting in a significant increase in standard margin %.
  3. Designed and built the new corporate infrastructure, including human resources, accounting, treasury and information systems functions, within six months  of the acquisition date.
  4. Developed a business plan and developed and implemented financial reporting against the business plan.
  5. Developed and implemented cash management processes, including developing and implementing cash flow forecasting, and integrating the cash flow forecasting with newly developed processes to effectively manage disbursements. The process was extremely effective in establishing and maintaining trade  credit for the new company.
  6. The issues with several new products were identified, solutions determined and the products successfully launched.
  7. Developed and implemented a new personnel incentive plan focused on profitability and the organization’s key objectives, and a new salesperson    compensation system focused on gross margin, sales growth and collections.
  8. Determined the Company’s electronics business unit was not feasible and accordingly substantially downsized the business unit.
  9. Rationalized various foreign locations and determined and implemented the most cost effective method of doing business in remaining required foreign
  10. Transitioned operations from locations shared with the publicly-held corporation at substantial cost savings.
  11. Devised and implemented a plan to avoid building a new manufacturing facility for one of the business units. Certain product lines were outsourced and other product lines were moved into existing space at one of the company’s other facilities saving an estimated $3 million versus the cost estimates for  building a new plant.

Key Results Obtained by Sues & Angart

  1. Turned company to profitable from an operating loss that effectively exceeded $20 million, in a little over one year.
  2. Managed cash effectively, including implementing an asset-based line of credit, increasing trade credit, meeting or exceeding budgets and reducing the     need for certain capital expenditures, thereby requiring less new equity investment than had been expected.
  3. Built a corporate infrastructure and financial reporting to replace the services being purchased from the prior owner on schedule, with the new infrastructure being far more efficient and cost effective than under prior ownership.