Advisory Case Study - Lighting contractor

The shareholders of a national street lighting contractor retained K2 Partners to save their business. The company’s debt level was such that the bank was about to appoint receivers. During the year prior to the appointment of K2 Partners, the company depleted reserves of £1.5 million in an attempt to stem losses. At the time K2 Partners accepted the assignment, the company was losing over £100,000 per month and had just incurred a loss due to stock write down of £600,000.

Upon appointment, K2 Partners took the following action:

• Arrested cash outflow and improved debt collection
• Negotiated with the bank, investigating accountants and key creditors
• Stabilised the company’s finances by repaying £1.5 million of debt and refinancing additional debt of £4.5 million through a combination of new investment and factoring carried out along side a company voluntary arrangement
• Installed new accounting and financial management systems
• Replaced Managing and Finance Directors
• Removed two layers of management leading to significantly increased output from front line engineers
• Reorganised management and working practices which restored company morale

K2 - Business Turnaround

The end result was that the company was restored to profitability, the creditors were paid in full and the company was positioned for sustained future growth.

Advisory case study – Marine engineering

The owner-manager of this business approached K2 Partners when his company breached various banking covenants that precipitated a withdrawal of an overdraft facility and ongoing support. Without access to cash, the company faced imminent walkout by contract labour if weekly wages were to remain unpaid. The business model was unviable with risk being carried under fixed-price marine maintenance and repair contracts. The steel fabrication department was under used due to lack of ships being repaired locally. A half-built fishing vessel was lying in one of the yards as a long-term building project for engineers when they had no other work.

Upon appointment, K2 Partners took the following action:

• Immediately took control of cash expenditures and generated sufficient cash to keep the business going while negotiating with the bank
• Agreed to an interim facility with the bank to keep the business going
• Refinanced the business by reducing the bank’s exposure, rescheduling existing finance and introducing a new source of finance
• Replaced accounting staff and auditors
• Installed daily cash and order management system
• Introduced financial disciplines with monthly reporting
• Sold the half-built ship and terminated most of the steel fabricators
• Fundamentally changed the business model to become a contract labour supplier supporting maintenance work both at sea and at other locations worldwide

K2 Partners - Business Turnaround

Advisory case study - Toy manufacturer

At the time the investors brought in K2 Partners, this loss-making toy manufacturing company was supplying major retailers in a highly competitive market. Margins had been severely squeezed by customers and available cash was limited with much of the company’s working capital tied up in materials and stock. Stock write-offs were frequent due to onerous contracts requiring the company to hold stock that could then become redundant when customers introduced design and colour changes. Quality issues were rife with penalties for late deliveries and defective products.

Upon appointment, K2 Partners took the following action:

• Changed the accounting staff and introduced a cash management system
• Reorganised operational management
• Changed the company’s quality control approach from end of line inspection to a process oriented system
• Managed consultation process and redundancy programme that resulted in the closure of the factory
• Moved the factory and operations to a subsistence area and re-established the business by implementing a viable business model
• Conducted extensive negotiations with clients, suppliers and employees to retain their ongoing support during a period of extreme turbulence

K2 - Business Turnaround - Toy Manufacturer Case Study

Advisory case study - Publisher

When K2 Partners took on this assignment, this publisher of technical magazines and organizer of exhibitions owed various trade creditors approximately £450,000 and had reached its overdraft limit of £250,000. On a going concern basis, the company had a negative net equity of about £600,000, which likely would have exceeded £1.0 million had the company been liquidated.

Upon appointment, K2 Partners took the following action:

• Negotiated with the bank and other trade creditors regarding outstanding balances and implemented payment plans
• Contacted suppliers of vital inputs and the company leasing the exhibition facilities and obtained commitments to supply products and to lease facilities
• Obtained additional finance by factoring trade debts Simplified the Company’s equity structure to enable it to raise capital more easily
• Raised additional funds through the issuance of equity, which represented a relatively modest portion of the Company’s outstanding shares
• Installed accounting and financial control systems Entered into new employment agreements with all employees
• Replaced two directors, including the managing director, and the financial controller

K2 Turnaround - Publisher Case Study

At the time K2 Partners completed the project, the Company was profitable and significant growth was projected for the foreseeable future.

Advisory case study - Internet

External investors retained K2 Partners when a secondary round of fund raising failed. The brief was to keep the company alive and find a solution that would provide a return on their investment. The boom among dot-com companies was faltering, and uncertainty was creeping into the market. The company was insolvent on both a balance sheet and cash flow test basis and had considerable liabilities.

Upon appointment, K2 Partners took the following action:

• A K2 Partner became finance director
• An informal moratorium was negotiated with creditors
• Limited interim finance was introduced
• The burn rate was cut to so that the business operated at break even
• The business model was revised to retain its future potential but in a manner that negated the need for additional investment
• The company sought private investors and joint venture (JV) partners
• A 30-year supply agreement was entered into with a potential US-based JV partner