Situation
A $200+ million, privately held ESOP, truck dealership based in the Upper Midwest with seven retail and service locations, had been incurring losses or struggling to achieve adequate profitability for several years after a number of organizational changes. Liquidity issues required the Company to refinance its line of credit. The newly appointed outside board of directors was uncomfortable with recent financial results and had significant concerns on the overall direction of the Company and in particular, its financial organization leadership. The board of directors requested a turnaround management firm be engaged to perform a full review of the Company’s recent financial results and operations; current bank credit agreements; and the capabilities of the accounting and finance organization.
Findings
Thin gross margins overall primarily driven through big truck sales with not enough focus on higher margin parts and accessories and repairs. The company churned through many transactions for $200MM in annual revenue but bottom-line results were never great; typically plus or minus $500K. Duplicate functions in the organization; a number of highly compensated employees; high overhead costs. 20% of parts inventory contained slow moving items that were considered ineligible for borrowing base. No cash or financial forecasting was performed on a regular basis. No strategic planning. Weak overall accounting and finance team.
Actions
The Company hired Turning Point as interim CFO/COO to develop a strategic and financial plan, restructure and lead the accounting organization, solve liquidity issues by implementing appropriate daily and weekly cash forecasting tools, implement a quarterly financial forecasting process, and review all operations to solve gross margin and profitability issues. Worked with key managers to implement operational changes and identify industry specific KPI’s to be monitored for success.
Outcome
Turning Point was able to turn the business around, generating positive EBITDA, meeting top quartile industry KPI’s, and ultimately selling the Company to a larger, well capitalized, truck dealer located in the mountain-west region. The sale was a significant win for the employees as they were all participants in the ESOP (Employee Stock Ownership Plan) and the Company was sold at a premium to the benefit of the ESOP participants
