Aftermarket Automotive

Aftermarket Automotive

Roles
Chief Restructuring Officer, Interim COO
  • Recovered working capital 
  • Increased GM and GP
  • Consolidated two manufacturing facilities

The private equity-owned aftermarket automotive company had embarked on an aggressive growth strategy growing revenues to $110MM and EBITDA $19MM, but the company was highly leveraged with $125MM in secured debt. Initially retained as CRO to determine the viability of the business and explore options for a path forward, CR3 professionals were later installed as COO. The engagement efforts recovered $3MM in working capital in the first six months, increased gross margin and gross profit, and consolidated two manufacturing facilities, further increasing gross margin. Over four-year period, sales reduced to $86MM, TTM EBITDA increased to $13MM, secured debt paid down $14MM, the company sold for 6.5x EBITDA.

The Situation

  • Private equity-owned aftermarket automotive company with four divisions specializing in ignition and electronic fuel injection systems, engine tuning devices, custom data acquisition, and display systems
  • Company embarked on aggressive growth strategy - revenues grew to $110MM and EBITDA $19MM; Company was highly leveraged with $125MM in secured debt held by an 11-member syndicate
  • Due to the financial crisis of 2008, revenue and EBITDA fell to $96MM and $3MM respectively, while secured debt was an unserviceable $120MM

The Work

  • Initially retained as CRO to determine viability of the business and explore options for a path forward; later installed as COO
  • Outlined plan to restructure debt and scheduled plan to rebuild earnings - the process required a reduction in working capital, consolidation of facilities, changing sales policies and procedures and a product development strategy
  • Rationalized product offerings and reduced SKUs by 30%, modified customer discount policy, curtailed extended payment terms practices and implemented an aggressive inventory control process
  • Restructured procurement process and ‘on shored’ over half of the sourced parts, simplifying the supply chain and further conserving working capital
  • Launched strategic product development plan which included new and industry award-winning technologies

The Results

  • Recovered $3MM in working capital in the first 6 months
  • Increased gross margin and gross profit as result of reduced SKUs and sales
  • Consolidated two manufacturing facilities, further increasing gross margin
  • Over four-year period, reduced sales to $86MM, increased TTM EBITDA to $13MM, paid down secured debt by $14MM and sold the company for 6.5x EBITDA

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