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.