£23m+ Valuation Improvement ValueBuilder Case Study
The owner of the business wanted to retire. The current value of the business was not high enough to meet the owners ambitions and the current management team had not improved the valuation in recent years.
The business had been expanded too quickly with low margin business and was running out of cash. The owner was very concerned with the survival of the business. The bank, which had £12m lent to the business was extremely concerned and had declined to lend further funds to the business.
THE PURPOSE OF THE PROJECT
To manage the business out of the current crisis. Then to improve the strength and quality of the business and increase the value of the business for a planned exit.
WHAT WE DID
Jess (Emerson Nash) worked with the management team to deliver in key areas which would improve the value of the business:
- Change the focus of the business from lower value outsourcing/administration to higher value recruitment operations. This work increased Gross Margin by 30%+
- Recruited higher quality staff to improve the skills in and capability of the business. Changed the culture of the business creating a strong performance mentality through visibility and better management practices
- Built a scalable operating platform: building IT systems to replace people and integrating 5 IT systems to produce a flow through on information from Engineer take-on, timesheets and invoicing. We also built the processes undertaken by staff supporting these systems and workflows
- Added £1m / year to profits from the restructure of a high value contract and over £5m in historical profit (one off)
- Restructured the business into a group structure to manage and reduce financial risk
The business valuation was increase by over £20m in 30 months. Profit before Tax increased by over 4 times and we generated over £24m in cash for the business during this time.
The Bank managers were relieved to be repaid their loan facility in full and delighted with the management team.
The Owner was really happy with the increase in valuation, the additional cash the business was generating, his increase in pay and dividends.
About the Business
- Provides engineers and contractors for the Oil & Gas industry
- Operates in over 20 countries
- Had recently won two large contracts, doubling revenue to £120m per year
- Was on the brink of failure and about to run out of cash