In the second half of 2018, we launched a reorganization and restructuring project with Verde&Bio, an organic brand in Italy. The company had closed the last two years with a negative industrial margin (-14% in 2017) and produced significant operating losses that had eroded the company’s assets.
Following our diagnosis, we identified two areas on which to intervene as a priority.
- Firstly, the industrial sector, with the aim of working on yields, processes, procedures and internal efficiency to improve industrial margins.
- Secondly, relations with creditors, in order to regain their trust and ensure continuity in procurement (of goods and financial resources).
Together with the owners, we have decided to undertake a turnaround process aimed at recovering the value of the company in 24 months with the objective of selling the profitable branch of the company once the restructuring process has been completed. Consistent with this objective, therefore, we have structured our turnaround path in the months to come through the following actions.
In these 2 years we have encountered challenges that perhaps would have been overcome by a less motivated corporate owner. On the contrary, one step at a time we have managed to do what many considered unthinkable:
- One of our plant managers was brought in and played a strategic role in reorganizing production and making processes more efficient.
- The owner was supported on the issue of margins, eliminating references with negative margins, working on procurement and pricing.
- Finally, we initiated dialogues with creditors in an attempt to gain their trust and, where not possible, restructure their debt.
The company was thus able to recover 20 percentage points of EBITDA and its value in just two years.
M&A and Turnaround to create value
Starting from the second half of 2020, we started the search for a potential buyer able to guarantee the development of revenues and the further strengthening of the brand, a partner with whom we reached the closing a few days ago.
The company was sold, as an asset deal, to Ki Group at a value of € 1.3 million, a result that we consider more than satisfactory considering, in fact, the turnover generated by the company in 2020 equal to € 1.5 million.
In contexts of business crisis, it is often difficult to think about “generating new value”. Most of the time we find ourselves with a company that, unable to generate income, and consequently cash, is impoverished in terms of assets, gradually destroying the value created by its members and managers over the years.
In these contexts, a Turnaround program may be the only way to recover value in a sustainable manner. But sometimes it may not be sufficient, especially when the company has production and/or commercial constraints that cannot be resolved from within.
It is in these cases that combining a turnaround process with an M&A operation can really be decisive. And as demonstrated in this successful case, it can become the best strategy for creating new value.
Heber Caramagna, Senior Executive Manager