Case Study: $10MM Service Business
Situation: Engaged by Board of Directors to perform valuation and advise on financial restructuring options as the company was facing liquidity crisis and imminent debt default.
- Company invested significant amount of capital in long-term assets that were not generating sufficient near-term cash flow
- Company tried to bridge cash flow issues with incremental borrowings of short-term debt
- Short-term lenders eventually were reluctant to provide additional financing without a major change in the company’s strategic direction
Solutions:
- Performed company valuation based on discounted cash flows and comparable multiples to revenue and EBITDA
- Analyzed allocation of enterprise value ranges across four classes of securities in current capital structure
- Advised Board on bankruptcy, sale, and financial and operational restructuring options
Results:
- Shareholders, management and lenders reached an agreement to resolve the issues with the operations and the capital structure
- The solution included a combination of operational improvements, a near-term cash flow focus, additional financing and a restructuring of the existing debt