Business Turnaround and Preparation for Sale


A business case of how the dVT Group helped a family owned business, over a 4 year period, to not only turn their business around, but also helped the business achieve a higher sale price, based on the increased profit levels achieved.


Situation:

A leading family owned, fresh produce grower and wholesaler was placed into asset management by a leading bank due to losses. They were experiencing negative cashflow and their debt level was increasing to a level that equalled its turnover. These undesirable results were a reflection of low productivity levels and poor reporting processes, including relying on annually prepared financial reports which were up to 18 months old.

Management had largely been blind to the real position of the company due to the poor reporting. They could see plenty of ‘cash’ coming into the business, but had little concept of the costs and liabilities incurred nor did they have the experience and skills to analyse their true position. There were also some management and HR concerns relating to a control bottleneck as part of the ownership structure with little empowerment of staff, a lack of documentation of roles and responsibilities, as well as no budgets, targets or accountability.

The dVT Group was approached to review the business and advise on a restructure to possibly save the business.

Actions:

dVT Group upon review saw the potential in the business, however needed to introduce the following key changes;

  • A succession process involving the removal of the parents and several siblings from the organisation:
  • Restructuring the business into separate divisions and the establishment of a management board on which dVT was part of
  • Establishing financial controls and systems with monthly reporting to provide up to date and relevant information
  • Introducing budgets for trading and capital expenditure, ensuring everyone understood the need to control cash and rein in the spending
  • Identifying the responsibilities and set KPIs for each division, with the heads of each division being held accountable for achievement of the KPI’s
  • Conducting a benchmarking exercise and using the outcomes to set employee production targets and introduce efficiencies on the production floor
  • Selling off surplus assets to reduce the banks exposure and the firm’s servicing costs

Outcomes:

Over a four year period, with dVT Group taking an active role on the management board, the turnover increased nearly 400% and operations were streamlined to become well managed, efficient and producing multimillion dollar profits. An example of the transformation achieved was taking the company from previously running three shifts per day to reducing to only one shift (plus some outsourcing), despite the massive increases in turnover. The bank was also fully paid out within this period.

During the same period, the dVT Group also conducted a second succession plan preparing the trading business for sale, which eventuated in the business being sold for a high end EBITDA multiple based on the current high profit levels. The deal also allowed the family to retain many of the primary production assets.