A national plant hire group was struggling with debts of $12M.
A year later, we’d saved the group and revenue was up 60%.
A national plant hire group based in Adelaide was struggling after 5 years of rapid growth.
It was a classic case of being a victim of their own success. The company had grown far too quickly and had an immediate cash flow requirement of $2M. Some of their branches were trading at a loss and draining even more money from the business. Management reporting and responsibility was poorly understood, seldom implemented and the owners and management were in crisis.
The owners had tried to prop things up by seeking finance but by the time we were engaged, the business’s credibility with its financiers was at an all-time low. 6 of the 7 lenders were in default.
Financial pressure leads to personal stress.
A financial crisis such as this one doesn’t just affect a company’s balance sheet. It has a profound effect on the people in the business including the owners, directors, management and employees.
When we first met, the directors were visibly stressed. Their relationships with each other and their families were tense and strained, and they all had personal property and assets on the line.
The directors were considering an offer from a national equipment rental group to buy the business for $9.8M increasing the pressure to determine and take the best course of action.
How we turned things around.
As with many of the clients we deal with, this situation required a very rapid response. We sat down with the directors and the CFO and after a few days, we had a detailed picture of the company’s issues. The issues were critical but solvable. Together, we worked out the best strategy to save the company – and once the Directors were comfortable with the recommended direction, we quickly set about getting the support of external stakeholders.
We started by introducing a strict cash flow policy and an active and communicative stakeholder management process. Standstill agreements were negotiated with the company’s seven lenders and extended payment plans were put into place with its major creditors.
Once the financial haemorrhaging had been stemmed, we set about restructuring the company for success. We helped the directors rebuild their branch network and refocused the business around the mining sector in Qld. They hadn’t considered this option before – and this was a major step forward in saving the company.
Management roles were redefined with a strong focus on revenue and achieving better and more profitable use of their hire plant. Much of the expensive and highly-leveraged equipment had been under utilised in the past – and this had been a major contributing factor to the company’s financial woes.
A year later, revenue was up by 60%. 18 months after our appointment, the business was valued at $15.5M, 58% higher than the offer initially received.
“It’s very satisfying to see the businesses turn around and doing well”, says Michael Fingland. “But it’s also important to remember the human aspect of what we do. In this case, we not only saved the company – but also the livelihoods of the directors and their many employees.”