Situation Encountered Upon Engagement

SARCOM had been recently purchased by a private equity firm. The company was losing almost $5 million annually. Angart was hired as Chief Operating Officer and Chief Financial Officer to turn the company around, manage cash and fix various financial issues.

SARCOM was party to an unfavorable management agreement with a previously related company. SARCOM received a management fee from the previously related company for arranging for the purchase and sale of computer equipment and software, servicing of related accounts receivable, maintenance of records, and employment of required employees. The finance company owned the accounts receivable, inventory and purchase orders. Angart recognized that he needed to fix this arrangement in order to turn SARCOM around.

Major Actions Taken by Sues & Angart

  1. Secured an asset based lending facility that allowed for borrowings up to $30 million, which gave SARCOM the capital to purchase the accounts receivable and inventory from the previously related company and meet future working capital needs.
  2. Terminated the unfavorable management agreement and purchased the accounts receivable, inventory and purchase orders from the previously related company, thereby transitioning SARCOM from a management company to an operating company.
  3. Reduced fixed costs by eliminating unprofitable branches and consolidating sales, procurement and administrative functions.
  4. Differentiated SARCOM from other hardware and software resellers that focused on product procurement with no design, services, or support capabilities, by implementing a services-centric business model based on a consultative approach with customers.
  5. Secured a Federal GSA contract and over 175 state and local contracts.
  6. Capitalized on key vendor relationships, increasing volume rebates and marketing development funds.
  7. Re-designed the company’s job costing system to be fully integrated with the financial accounting systems, thereby showing reliable profitability by customer and service request orders.

Key Results Obtained by Sues & Angart

  1. Successfully transitioned SARCOM from a management company to a lean, well-run operating company that was differentiated from its competition and had competitive advantage.
  2. Improved liquidity and reduced the cost of financing from 18% to 7.75%, thereby reducing interest expense, and allowing the company to take cash discounts of approximately $600K per year.
  3. Lowered sales commission expense by approximately $500K per year, via the re-design of the company’s job costing system, which allowed for accurate reporting of profitability by customer.
  4. Increased net income from a loss of $4.8 million in 2004 to positive $6.8 million in 2007.
  5. Sold the company for $55 million, which was 4 times the amount it was purchased for by private equity 3 years earlier.