Corporate Case Studies
Company Industry: Refrigeration & Mechanical
Company Structure: Incorporated
Number of Employees: 40
Corporate Synopsis:
Annual sales $6,000,000 – Company ran into some difficult times financially as a result of a very large project that ran under budget and as a result was slow to pay and eventually wasn’t able to collect on the large balance outstanding placing tremendous stress on the company. Once this happens the banks start getting concerned as the company is outside of their forbearance arrangements. The creditor payments start getting behind, banks, CRA, suppliers, which is what happened. The bank threatened receivership and sent in a monitor to review the operations of the company. CTG was called and we came up with a plan with the Company’s management team and dealt with the bank, CRA, and suppliers.
Corporate Outcome:
Company hired CTG, all communication for bank, CRA, and suppliers we dealt with by CTG and lines of communication opened up once again to make sure creditors were not hostile and would support a plan moving forward. The Company filed a proposal under the Bankruptcy and Insolvency Act and requested an extension to file their proposal to creditors to come up with a plan to replace HSBC as the secured creditor as the bank wasn’t interested in dealing with the company any longer. A plan was perfectly executed, the bank was paid out in full, CRA payroll was paid back in full, and the remaining creditors including CRA for GST were paid back at a 35% dividend against each dollar they were owed. Process for the entire restructuring from start to finish 4 months
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Company Industry: Construction Management
Company Structure: Incorporated
Number of Employees: 60
Corporate Synopsis:
Annual Revenue $12,000,000 – 2013 – Company acted as general contractor on a number of very large construction projects throughout BC and Western Canada, including malls with London Drugs as major tenant, they were also general contractor to Cineplex. The problem started when the company wasn’t paid in a very large project it was working on, the amount exceeded 1 million dollars, which placed an immediate strain on all divisions of the company. CTG was referred to the company’s principals and numerous interviews were conducted, which also included some strategic planning. It was agreed that CTG would be hired to execute on a plan, which included talking to all suppliers, sub-contractors, banks, and existing clients.
Corporate Outcome:
The Company filed a proposal under the Bankruptcy and Insolvency Act and the process from start to finish took approximately 5 months, although the company was able to operate normally in a daily course of business. CTG took care of all calls including very hostile ones and when the proposal was finally presented and on the date of the creditors meeting 48 creditors attended and it was by unanimous decision that the proposal was accepted at 24% dividend repayment on each dollar owed to all creditors. The company continues to operate very successfully today
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Company Industry: Retail Paint Industry
Company Structure: Incorporated
Number of Employees: less than 5
Corporate Synopsis:
The company had a very large hostile creditor that was forcing the business into a corporate bankruptcy. CTG made arrangements with the creditor to hold off its legal proceedings while the company was evaluated ahead of a court ordered liquidation sale by the bailiff.
Corporate Outcome:
CTG assessed the viability of the business, found a buyer for the company, and assisted in an asset sale where the creditors received 5X what was estimated in a asset liquidation. The business is still successfully operating under new management and the creditors received more through the asset sale.
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Company Industry: Retail Spa Industry
Company Structure: Incorporated
Number of Employees: less than 20
Corporate Synopsis:
The Spa operation experienced a number of competitors open up within a 5 minute walking distance of its business. After more than 8 years of successfully operating the business it was losing money putting further financial strain on the owners. The business was starting to fall behind on its landlord lease payments and payments to its major creditor. The business was at risk of being locked out of its location and losing its inventory, business assets, and leased equipment.
Corporate Outcome:
CTG was successful in negotiating a reduced landlord lease payment that bought the company valuable time as the business operation was being assessed. The decision was made to strategically wind up the operation in order to maximize the return to the business owners. Through the busy period of December it created a huge gift certificate promotion with a 60 day redemption period, paid the reduced the landlord lease payments and stopped paying its major creditor. After 90 days the business was closed down, the business assets removed and the landlord and major creditor were notified. CTG then negotiated settlements using the additional income and the business owners sold off the business assets thereby effectively closing the business without any losses.
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Company Industry: Landscaping company
Company Structure: Sole Proprietorship
Number of Employees: 8
Corporate Synopsis:
Company was promised a number of large contracts and leased the equipment to meet the anticipated demand, the new contracts didn’t come close to providing the work that was predicted and the company became completely overwhelmed with the debt payments and even though they were 3 months away from entering the busy season there was no way they would last that long.
Total Debt – approximately $900,000 –
$600,000 secured leased equipment
$298,000 unsecured suppliers and personal credit used to fund the business
The client visited a bankruptcy trustee prior to visiting our office and the only solution offered was file a personal bankruptcy, stop operating the business, and get a job. The trustee wanted $10,000 down to start the file due to the complications of notifying the secured creditors and arranging for them to take back the assets with negative equity and selling those with positive equity and the equity would then flow into the bankruptcy.
The client fully believed the business would be viable if they could get relief from the overwhelming debt payments and reorganising the company better. The client’s deepest desire was to somehow keep the business operating.
Corporate Outcome:
CTG completed an unbiased review of the company’s cash flow with a hard look at what equipment was critical to meet the pending busy season and what was surplus to the company’s requirements and what would need to be returned to the lessors.
With a complete understanding of what secured assets would remain CTG then completed a 12 month cash flow projection for the business to determine if the company was viable. The secured debt service payments were reduced from $15,000 a month to $6,000 and with the projected revenues the business was now viable in a reduced capacity, but much more manageable for the owners.
The plan still left the unsecured creditors and suppliers restless, and because the business was a sole proprietorship the business debt was the owner’s personally and vice versa so we needed to help them structure a Consumer Proposal under the bankruptcy act. We selected the trustee we wanted to work with and structured a proposal that offered $700 x 60 months = $42,000 to settle the $350,000 of total debt. After a number of discussions with suppliers and other creditors the proposal was accepted by the creditors.
Now with some breathing room and a business that is sustainable the client entered the busy season focused on running the business and aggressively paying down the proposal.
The next step is to look at the structure of the company and the benefits of incorporating and creating a clear separation between business and personal assets and liabilities and continue to ensure cash flow is carefully monitored and to allow for the slow months.
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Company Industry: Retail- Dry Cleaning
Company Structure: Sole proprietor
Number of Employees: 8
Corporate Synopsis:
Annual sales of $1 million. Founder and owner of a new concept in the dry cleaning industry wanted to take his new business model of ‘green cleaning’ and franchise the environmentally-friendly operation within Canada. (This new concept of using 100% biodegradable solutions, recycled water and energy efficient power is quite common in Europe and is trending well in other parts of the USA). Although the client was operationally strong, he lacked the sales, marketing, branding and business acumen required to take his one retail unit and to expand it into other markets.
Corporate Outcome:
The first step was to complete an industry and competitive analysis and to determine the true value proposition of green cleaning over traditional methods. In conjunction with creating a vision and strategic plan for the owner, a business plan was developed outlining the opportunity and bringing into focus the next steps for the organization. The detailed work performed by our consultant indicated expansion could be more efficient by adding corporate retail outlets, operating in a ‘hub’ model (one centralized production facility and five to six satellite locations where there was customer drop-off and pick-up only). This business plan was used to attract investment for the expansion and assisted in the owner retaining control of his business units, increasing revenues and improving his profits.
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Company Industry: Building Supplies
Company Structure: (Incorporated)
Number of Employees: (50)
Corporate Synopsis:
A family run operation in business for over forty years was experiencing decreasing revenues, dwindling profits and loss of market share in the retail, wholesale and distribution side of their business. Cash flow challenges were restricting the business from investing into new equipment and technology that was required to make the company competitive. Without a strategic plan to follow and a priority list of next steps, morale was poor as the front line employees were trying to keep clients and suppliers happy, without any change or solutions in sight. The owner of the company wanted to build up revenues and profitability, retain key employees and improve the overall valuation of the business before looking for an exit strategy.
Corporate Outcome:
Our consultant’s first order of business was to immediately ensure tough decisions were made so the company was able to both immediately ‘free-up’ cash and become financially break-even within sixty (60 days). The next step was to create a strategic plan, with an exit strategy within three (3) years, while ensuring there was strong and effective communication both internally (to the employees) and externally (to suppliers and key clients). Finally, a tactical action plan was implemented to effect systematic change through the company on a regular basis. The last step was to develop a sales and marketing plan, develop new products and markets for revenue expansion and to hire and train new and existing sales representatives. Within three years, the top line revenues grew by 40%, the profitability was at 20% and the company was successfully acquired at an attractive valuation.