Case Studies

Business Assessment & Sale of Equipment Dealership

J.S. Held Acquires Clark Seif Clark, Strengthening West Coast Capabilities for Environmental Claims, Disputes, and Catastrophe Response

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The Situation

Caterpillar equipment dealership with approximately $150 million in revenue. $60 million debt.

  • The company had lost over 15% of its revenue due to the economic recession, which affected the housing and construction industries.
  • Further compounding the problems, the OEM had forced the company to hold excess inventory during the recession to boost its sales, resulting in working capital being tied up in inventory.
  • Senior management had experienced multiple turnovers, resulting in a lack of effective management processes, particularly in cash flow management.
  • Cost-cutting efforts fell short of achieving profitable operations.
  • The company faced a significant crossroads as it was also losing the trust of the OEM.
  • Inconsistent messaging, multiple versions of financial projections that did not reconcile to audited financials, had resulted in a very fatigued Bank group.

How We Advised

Our experts reviewed the company's forecast assumptions for reasonableness.

  • While in the midst of the assessment, the company decided to pursue a sale. Our role evolved to include valuing the company and monitoring the quality of assets until the company's sale was completed.
  • The bank debt (approximately $60 million) was unsecured and pari passu with OEM debt, leading to a very vulnerable and exposed position for the banks if the sale proceeds fell short.
  • Last-minute reductions in the buy price resulted in a shortfall of almost $13 million, which the company had expected to be shared between the OEM and the bank group.
  • Thorough due diligence and analysis of the APA, with its implied legal implications, led us to conclude that the shortfall for the banks was not $6.5 million, but approximately $1.5 million.
  • The bank group leveraged this analysis, as well as its relationship with the OEM, to negotiate proceeds with the company.
  • The company’s sale was completed, and the shortfall was refinanced by OEM, and the lender group was paid in full.

Key Contact

Dan F. Dooley, CTP 
Senior Managing Director 
Strategic Advisory Practice 
+1 603 660 8952 
[email protected] 

Related Practice Areas

> Turnaround and Restructuring Services 
Navigating the many challenges confronting a company in transition requires an operationally focused approach that looks beyond the balance sheet to minimize further degradation and build a path to sustainable growth. Drawing upon decades of experience in the turnaround space, we help companies in transition identify practical strategies to improve profitability and liquidity for immediate relief, while concurrently developing and executing a comprehensive turnaround plan for long-term, sustainable value creation. 

 

> Business / Operational Assessment 
Most consulting firms approach a business assessment from a purely financial perspective — our assessments provide a 360° view of a business, addressing growth drivers, profitability, and uses of capital. Along with detailed financial performance reviews and cash flow forecasting, our comprehensive Business / Operational Assessment identifies the various challenges clients encounter throughout their operations. 

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