Operational Plan Brings Clarity to New Team

TypeOperational Planning
Quick Facts$20 million manufacturer of engineered industrial components (“CustomCo”) sold via direct sales and distribution to both OEM and end user markets
ChallengesIn the five years after a management-led buyout (backed by a private equity group) from the company founder, CustomCo’s financial performance had been erratic. Some key managers were replaced and the operational and financial health of the business had improved. Sales had finally begun to grow beyond pre-buyout levels. At the time the majority owner was considering a sale to the new management team, the CEO passed away unexpectedly.
ApproachBecause of the temporary leadership void, the majority owner decided they wanted a fresh look at the company. I was asked to perform a strategic and operational “due diligence” of the business. I quickly:
  • developed a five year detailed historical analysis and near term forecast for the top 25 customers
  • assembled a competitive analysis and objective ranking of CustomCo by market segment
  • led an iterative process with the management team to create a functional operational plan
  • recommended a course of action for the business
ResolutionThe due diligence conclusions were mixed:
  • while sales were growing overall, 20 of the top 25 customers had declining sales over the last five years
  • aside from the CEO’s untimely death, the management team was stable and executing effectively
  • new product/new customer opportunities appeared to be achievable in the short term
  • the senior debt holder was patient; cash flow was good
  • a subordinated debt holder was anxious for a sale to take place

The majority owner made the decision to hire an interim CEO to grow the company (one year later they retained an investment banker to sell the company).

Links to the other operational planning cases:
  1. Operational Plan Integrates an Acquisition
  2. New Strategy Generates Action…Operational Plan Produces Results

To view a list of all McHugh & Company Case Studies, click here.