Management and Operations Support During Crisis Situation

Manufacturer of Recreation Products

Situation

A manufacturer and distributor of recreational products was experiencing severe losses and erosion of value. Although gross revenues remained strong, significant changes in product mix combined with poor financial and product cost information resulted in management being slow to identify the causes and solutions for the problem. DWH was asked to advise the company through the crisis, including devising solutions that would provide the most value to existing stakeholders.

Solution

DWH assessed the situation and discussed the appropriate go-forward plan, determining whether to try to refinance and recapitalize the company or to assist with discontinuing operations and liquidating. Due to the severity of the situation, DWH recommended that operations be temporarily discontinued while seeking an expedited sale or recapitalization. DWH also provided advice and assistance in communicating with the company’s senior lender.

During a period of approximately 45 days, DWH advised the company through a process that included identification of parties that were qualified, credible, and who may have an interest in providing a financial solution, and who also had the ability to dedicate the necessary resources to reach an agreement and close in a timeframe that preserved the value of the enterprise; contacting each interested party, describing the situation, and responding to initial inquiries; providing requested due diligence information; and negotiating with parties who continued to demonstrate interest and ability to close a timely transaction that would meet the expectations of stakeholders.

Through this process, the company agreed to the sale of its assets to a competitor, a solution that provided considerably more value than liquidation.

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