Declining Shareholder Value

Summary

A 50-year-old, multi-brand company serving the automotive industry had seen growth through new product innovation and strategic
acquisitions. Passive investors held little confidence in the active investor’s role as president but were unwilling to press for leadership change. Concerns
included declining sales, profitability, poor integration of a recently purchased business, and lack of a unified vision. One of the sub-debt/equity
investors invited Platinum Group to conduct a business assessment and offer recommendations. All four owners agreed to the review.

Challenges

• Integration of the most recent purchase — a company of the same size located 700 miles away and selling into a different market— was
  going poorly. Employees were resisting the consolidation, and company direction was unclear. Morale was very low and frustration was very
  high at both locations.
• The acquiring company moved from selling a product line to a "engineer to order" business model. Lack of engineering resources
  precluded execution, increased order backlog and resulted in unfulfilled promises to customers.
• Operating losses ensued depleting the company’s working capital and caused payments to vendors to be stretched.
• The acquisition and lack of unified, consistent leadership had triggered the demise of profitability. The challenge to integrate operations and
  create a unified culture, vision, share costs and share best practices had proven unsuccessful.

Response

Platinum’s team assessed the business to determine critical issues impeding profitability so each shareholder could determine next steps. The
review included site visits, industry research, one-on-one interviews with 30 of 100 employees in both locations, and a detailed review of company
information and financial data.

Platinum identified and offered financial, organizational and operational recommendations to ensure the success of the company. Market trends
indicated low demand for the acquiring company’s products and shareholders were concerned about the loss in enterprise value as a result of recent poor performance. Given the shareholders had differing investment objectives and time horizons in which to maximize value and/or achieve liquidity, Platinum identified options for each shareholder.

Results

The active owner, who ran and continues to run the company as a lifestyle business, found a new investor. The two passive investors and the
third (minority) shareholder sold their shares to the active owner. Based on a multiple of EBITDA, they received a premium price. Platinum was successful in developing and implementing a solution that eliminated the leadership impasse that existed before Platinum was engaged — and will hopefully allow a return to profitability.