A private equity owned business had occupied successfully a niche in servicing call centre requirements, largely for financial services companies, and expanded its scope through integration with a business servicing corporate voice and data communications. The market downturn and loss of key sales people impacted sales pipelines, which in turn impacted a key source of working capital – trade accounts with key solutions vendors. When downsising, additional restructuring costs (largely redundancy) cause cash flow problems, that resulted in the main lender requiring advice on the riskiness of management’s proposal to turnaround the business, and what form of finance, if any to deploy – more debt, or take equity and benefit from possible upsides.
David, with his knowledge of call centres and commercial experience in similar businesses, was asked to review management’s recovery plan, interview the management team and provide advice on key issues. This process identified five key areas that management recognised as causing the cash flow problems. In addition to the impact of market conditions on ‘discretionary investment’ and sudden reduction in sales horsepower, other issues included a project that failed due to faulty vendor technology and issues with start up ventures on which the business had embarked. Management was asked to describe the actions required, either in progress or planned to address these issues, and was challenged on underlying assumptions.
Generally we found management had grasped the key issues, was responding effectively to the challenges and had some ‘invest to save’ propositions that would be valuable in mitigating some the downturn’s impact on spend. Overall, it was reasonable to conclude that prospects for recovery were promising.