Electrical Connectors
The Situation
- Company acquired a manufacturer of electrical components primarily to automotive industry
- Facility experienced significant post-close integration issues and revenue declines due to loss of customers
- Company’s private equity sponsor commenced a sale process, which it discontinued when no suitable buyer emerged
- With only a few weeks of available liquidity to support business and no further funding available from sponsor, CR3 Partners was retained to evaluate company’s options
Role(s)
- Financial Advisor
The Work
- CR3 partnered with senior management to develop an out of court wind-down plan of business where key customers would support plan by paying surcharges on their products in return for receiving sufficient supply while transitioning to alternate suppliers
- Verified which customers would agree to surcharge pricing based on criticality of their products and negotiated accommodation agreements to finance wind-down plan
- Developed cash forecast to manage cash disbursements and allow for customers to monitor wind-down process
- Negotiated with company’s senior lender on repayment of its outstanding term loan and receivable factoring arrangement
The Results
- Out-of-court process allowed for orderly wind-down of business
- Key customers who entered accommodation agreements received continued product supply while they transitioned to permanent supplier
- Key management and manufacturing employees were retained so that production was not disrupted
- Sale of European operations to management buyout team provided employees with continued employment while minimizing liabilities to parent company
- Senior debt and unsecured claims were paid nearly in full
- Private equity sponsor received maximum value with spin-out of a subsidiary
Overview
- Manufacturing
- Financial Advisory