Background

• $31 million multi-divisional Drug Testing Service and Drug Manufacturing Company performing FDA-approved preclinical drug manufacturing and preclinical chemistry and drug testing analysis to serve major drug makers and emerging biotech drug developers

• The Company was owned by a significant, global Private Equity firm that had used it as an acquisition platform to acquire multiple other companies on a global scale

• After years of internal mismanagement and over $100 million of equity capital investment, the Company disposed of the acquired entities leaving only the original platform

• Company annual performance had significantly deteriorated with annual revenue dwindling to $31 million producing producing negative $4.1 million of EBITDA (from its peak of $150 million in revenue and positive $7 million of EBITDA)

• Additionally, the Company was experiencing an immediate liquidity crunch and the owners and Board were assessing its viability

• The Private Equity firm had enough and determined it needed strong middle-market, hands on leadership to take over running the business, restore profitability, and create an exit strategy to transition the Company to a new owner

CM&A Role / Turnaround Process

• In an effort to protect the Private Equity firm from negative publicity and follow-on liability, CM&A engaged to be the Company's Chief Restructuring Officer (CRO) with an assignment to assess viability, stabilize cash flow, and develop a transition plan to wind the business down or sell to another owner

• Pre-Transaction:

  • CM&A successfully stabilized cash flow and turned the Company cash positive to the point where it was determined the Private Equity firm could sell the business to new ownership rather than winding down the operation

  • CM&A contacts were instrumental in bringing the consummating buyer to the table, which resulted in the Company being purchased through a share transaction by a local value-purchaser Private Equity firm

  • As the transaction closed, the new ownership group retained CM&A in the CEO and EVP operational and officer roles within the enterprise

• Post-Transaction:

  • CM&A completely revamped how the Company was run and developed a new managerial approach for operating the business (e.g., project metrics, roles, responsibilities, customer contract review, internal billing structure for Technical staff) while helping rebuild the Company to a profitable Drug Testing Service and Drug Manufacturing business

  • Elected to replace underperforming staff and recruit new key talent in the Technical and Sales areas

  • Divided the Company into two separate companies (FDA / USDA-Approved Drug Testing entity and FDA-Approved Drug Manufacturing entity)

  • In support of this, purchased the real property of both entities from the existing landlord for $11.5 million, ultimately sub-dividing the real property into appropriate parcels for each business

Outcome

• Saved approximately 225 high-paying Technical jobs in the Company’s region by executing a successful transaction and avoiding a wind down scenario

• Created a favorable annual EBITDA swing of $6.5 million, as compared to the start of the CM&A engagement

• Successfully sold the now separated entities in a two-step transaction process for an ultimate gain of $12 million to the value-purchaser owners 

• Created wealth for new owners through the completion of extensive turnaround work over a 4-year period