Aftermarket Automotive Parts

The Situation

A private equity-owned aftermarket automotive company with 4 divisions, specializing in ignition and electronic fuel injection systems, engine tuning devices and custom data acquisition and display systems had embarked on an aggressive growth strategy. Revenues had grown to $111MM and EBITDA was $19MM. However, the company was highly leveraged with $126MM in secured debt held by an eleven-member syndicate. Due to the financial crisis of 2008, revenue and EBITDA fell to $96MM and $3MM respectively while secured debt was an unserviceable $119MM.

Role(s)

Interim Senior Leadership

  • CRO/CEO
  • COO

The Work

We were retained initially as CRO to determine the viability of the business and explore options for a path forward. After outlining a plan to restructure the debt and establishing a plan and schedule to rebuild earnings we were installed as CEO and COO. The process required a reduction in working capital, consolidation of facilities, changing sales policies and procedures and a product development strategy.

The Results

  • Rationalized the product offerings and reduced SKU’s by 30%, modified customer discount and extended payment terms practices and implemented an aggressive inventory control process. These actions recovered $3MM in working capital in the first 6 months.
  • The eliminated SKU’s further reduced sales but increased gross margin and gross profit.
  • Consolidated 2 manufacturing facilities, further increasing gross margin.
  • Restructured the procurement process and ‘on shored’ over half of the sourced parts, simplifying the supply chain and further conserving working capital.
  • Launched a strategic product development plan which included new and industry award winning technologies.
  • Over a 4 year period reduced sales to $86MM, increased TTM EBITDA to $13MM, paid down secured debt by $14MM and sold the company for 6.5 x  EBITDA

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Overview

  • Automotive
  • Restructuring and Turnaround

Engagement Team