Industrial Distributor

The Situation

The client is a private equity-owned industrial distributor that provides surface-preparation media and equipment, safety items, PP&E products and equipment rentals. The company operates 12 locations and completed two major acquisitions that were poorly integrated. A drop in oil prices led to a 13% decrease in sales and a 40% reduction in TTM EBITDA. In addition, the company was negatively affected by an incomplete ERP implementation and a poorly-executed warehouse consolidation. Ultimately, the management team’s efforts were not enough to forestall a financial-covenant default.

Role(s)

• Interim COO

The Work

CR3 was engaged to perform a four-week operational assessment, after which we were hired as interim COO to implement our extensive recommendations. During our 16-month engagement, we created and tracked monthly operational KPIs; led the effort to reduce past-due accounts receivable to generate cash; instituted improved inventory-management practices; and put in place the previously incomplete ERP system changes place. CR3 also supported the client’s new CFO in managing cash and creating lender deliverables, evaluating M&A opportunities, standardizing customer contracts and establishing a new supply chain for its principal product. Toward the end of the engagement, CR3 conducted a four-week sales-function assessment to address top-line weakness in the business.

The Results

CR3’s on-site presence during the engagement helped stabilize operations and provided the owners and lenders sufficient confidence to execute a financing amendment and relax financial covenants for an 18-month period. Order-fulfillment results improved with conservative final results at 98% shipped complete, over 99% shipped damage-free and over 96% invoicing accuracy, and CR3’s efforts in reducing aged receivables to 16% from 36% provided over $3MM in working capital. CR3 assisted the private-equity owners with sourcing, evaluating and onboarding a new CEO; and the sales-function assessment served as a roadmap for the new CEO to ensure a successful transition.

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