Background

• $17 million multi-location, seven branch retail / distribution / service home healthcare business was acquired by a group of private investors from a Detroit-based, large retail drugstore chain

  • The Company was sold in a stock sale to the group of private investors in a classic leveraged buyout transaction (LBO)

• The retail drugstore chain had previously established the Home Healthcare (“Homecare”) division through a series of acquisitions of homecare providers

  • Although a Home Healthcare division made strategic sense for the drugstore chain, the acquisitions were not properly integrated and the Homecare division was consistently unprofitable

• Within months of the buyout transaction, certain key operating executives had exited the Company

• Sustained operational underperformance, with respect to expectation, led the Company to fund its significant losses with senior debt

• Furthermore, the Company’s senior lender had begun to tighten cash availability as Payroll expense had increased, Inventory had grown exponentially, and Accounts Receivable write-offs / reversals were skyrocketing

CM&A Role / Turnaround Process

• CM&A Partner took over as permanent CEO of the business

• Upon assuming the executive role, CM&A centralized the Company's customer service and billing departments and established strong training programs and procedures for these groups

  • Centralization allowed for a significant reduction in the number of positions required to perform the work while also expanded the Company's capacity to add retail and distribution sites

• Implemented more strict, pre-qualification screening procedures for all patients during order-entry, ensuring the Company accepts patients with sufficient insurance coverage

  • This action greatly reduced the Company's reversal and bad debt expense

• Eliminated unprofitable products & services by renegotiating unprofitable service contracts and terminating those contracts which were not seen as viable

• Additionally, established new volume purchasing contract guidelines for higher-volume sales products

• Consolidated two under-utilized large warehouse facilities and pharmacies into a central master distribution center

• Renegotiated one of the Company's two significant joint venture arrangements to equitably absorb operating expense

• Addressed the Company’s growing debt concerns through senior debt repayment of from a combination of positive operating cash flow and factoring of receivables

• Sourced stronger, more capable talent to assume the roles of: CFO, Controller, Reimbursement Director and MIS staff

• Replaced the Company's aging computer system with a state-of-the-art WAN and reimbursement / financial system

Outcome

• As a result of intensive work, the Company showed lower top-line revenue, largely due to the elimination of unprofitable sales agreements and product lines

• Despite this, gross margin had improved by 14% and the Company was showing strong net profitability

• Annual EBITDA increased by $2 million

• Repaid the Company's senior debt and reduced total liabilities by over $2 million

• Successfully sold the Company at a profitable value on the private investor group’s capital, which had been considered lost before the turnaround work