Changing Momentum: The Power of a Restructuring CEO

Sometimes the problem presented by the client is not actually the problem that needs to be solved. The challenge is to identify what the real problem is, what needs to be done to resolve it, and in what order. Boards and Management teams in the hot seat are often too focused on a number of smaller things that take up the majority of their time, rather than standing back and seeing the broader picture. A ’heads down’ approach has its place, but it is as equally important to get out of the woods, look up, and reflect on what is going on.

This was certainly the case for one such private equity backed construction services business who were seeing declining revenues, deteriorating profitability, and operational inefficiencies in their multi-site depot network – all whilst in the process of looking to implement a new ERP and CRM system to address some of these issues. The project originally presented to Eton Bridge Partners was for the provision of a Transformation Director to lead a technology implementation. What unfolded was far from a simple technology play!

A number of interim candidates had been presented to the business before Eton Bridge Partners were engaged by the private equity fund and majority shareholder.

Steve Deverill, who was the lead consultant for Eton Bridge Partners, commented;

“It immediately sounded like a bigger challenge than the one the business had been hiring for and clearly required an enterprise wide turnaround. Naturally the best place for this type of engagement was to be led from the very top and if the situation allowed, a restructuring-focused Interim CEO was needed to provide the strategic oversight and clarity of vision to enable the business to bring forward improvements quickly to gain the crucial momentum and traction internally and externally.”

Eton Bridge Partners introduced one such turnaround and restructuring specialist from their associate network called Jeremy Fry. Jeremy was able to constructively challenge both the equity fund and the portfolio business through a series of meetings to help them  identify the broader challenges and questions to be addressed.

This process helped the PE fund realise that a bigger change was required and instead of bringing on board a Transformation Director, they opted to bring in an Interim CEO with a transformation mandate.

The approach taken by the Interim CEO was one of a systematic review of the business processes, finance and operations, sales, marketing and technology. The opportunity was to streamline the business activity to reduce cost, and more importantly to establish a business capable of winning lost customers back, and improving the revenue outlook. The technology project involved the implementation of a new front end to support customer engagement and Microsoft ERP (Dynamics Finance and Operations).

As part of the initial diagnostic evaluation, the Interim CEO raised with the Board and investors that the spectre of ‘going-concern’ was the inability of the business to meet certain interest payments around the debt coupon. This was an unexpected element of the project  which brought conflict in to the various stakeholders, resulting in the appointment of advisors by the company to support an options review, and to determine a course of action to mitigate and resolve the ‘going concern’. This brought into sharp relief Directors duties ensuring that proper checks and balances were in place for all stakeholders.

Throughout this, the Interim CEO and Eton Bridge Partners were in regular contact in what was an unexpected, and extremely challenging project.

“This was not quite the brief I had anticipated, but there was job to do and no point being distracted by the cash position. It was time for leadership and doing the right thing for all concerned.” Jeremy Fry commented.

An agreement was reached with the Board for the company to appoint legal advisers resulting in management developing a detailed business plan and presentations to debt and equity providers. Within 6 months of the project starting, a consensual deal involving a debt for equity swap of nearly £250 million dramatically improved the viability and market position of the company. Additional funding firepower was provided via an ABL provider who bought in to the business plan.

During the entire project, and in parallel with the company refinancing, the transformation process continued at pace. There was a considerable focus on executing a target operating model and area structure, cost reduction and improving programme efficiency across the business, pushing customer acquisition through predatory pricing initiatives to regain lost market share, and driving up labour and asset utilisation through better planning and engagement. The sales organisation was restructured to align themselves with the target operating model, and the HR team was reorganised to reduce ‘soft’ activities which enabled the introduction of company-wide personal objectives and performance management.

The overarching objective was to reduce time in internal meetings which had become the norm, and to get the company focused on their customers and those activities to drive  customer acquisition and engagement. The company had lost a substantial number of customers through a failure to understand their buying decisions and by correctly pricing its services, along with a sizeable reduction in market share – all of which needed urgently fixing.

Alongside the operational activities the ERP project remained a parallel workstream. Eton Bridge worked with the Interim CEO to support and build a bespoke project office lead by an experienced Interim Project Transformation Director. This additional resource was a pivotal support for the company CIO to enable the workstreams to be brought forward to recover the historic delays. The ERP project successfully cut over in November 2019 going company wide. The final solution included a full suite of Microsoft Office, Teams, Talent (HR Module) Dynamics (including bespoke front office module) and Enterprise data repository (which housed a unique and scalable data set to support business decision making).

All of this was achieved from a standing start within 8 months of the Interim CEO being appointed. The resultant ERP underpinned significant improvements in invoice accuracy, invoice value, time sheeting, wage claims, cash collection and DSO. The new CRM system has facilitated the implementation of an inside business support function dramatically, enhancing customer engagement and new business wins. A new website was also launched bringing together various facets of the technology project. The website is now considered as a market leading site, and the aligned social media campaigns have created a reach of over 25,000 contacts. Jeremy Fry commented:

“It’s not very often a business has the benefit of an accelerated change programme, but when you get the right people involved with a clear mandate you can dramatically enhance a business, its future and of course its value.” 

This was a real success story combining management change (people), process improvement (efficiency and effectiveness), a new and scalable technology platform (data and streamlining), and finance (reducing debt burden and better invoice cash generation and collection), demonstrating the power of collaboration and getting the right people involved at the right time.

A salient reminder that when there is an issue in a company, the right approach is needed to unlock the answers.

“This was a turnaround project that really stood out for me, not only because of the tangible benefits achieved, or the reality that it saved a business and put it back on course, but the power of a trusted partnership which we  had with Jeremy. He had the ability to navigate extremely challenging and highly pressurised situations through open, honest communication, support and a huge amount of hard work and belief.” said Steve Deverill.

Steve Deverill

Partner
Head of Business Transformation and Digital & Technology Leadership Practices


Steve is Head of the Business Transformation practice and manages executive level interim appointments. He supports global businesses, FTSE 100s and entrepreneurial SMEs with transformational business change projects.