Private Equity Decides to Hold and Restructure

TypeStrategic Assessment
Quick Facts$125M multi-location retailer (“SportsCo”) located in the southeastern U.S. Majority owned by two private equity groups. The original, founding management team had been replaced.
ChallengesA long-term acquisition rollup strategy failed to achieve the expected profits and operational efficiencies. Despite SportsCo’s strong regional presence, the outside private equity owners were frustrated with the company’s overall weak performance and the enormous amount of time being spent by the investment professionals “working the issues”.
ApproachThe investors wanted an independent, objective advisor to work with management and the Board. Our job was to free up investor and management time, investigate a range of strategic options, and recommend a practical direction for the business. Major tasks included:
  • working with SportsCo’s management to become “part of the team” and understand the “as is” condition of the company
  • preparing a descriptive memorandum and financial summary of the business
  • contacting and interviewing investment bankers, specialists with relevant industry experience, prospective merger partners and potential high net worth investors (“industry enthusiasts”)
  • organizing and presenting the pro’s and con’s of each strategic alternative
ResolutionMerger negotiations with a similar company in another geographical region failed due to differences in valuation. Given that, the best course of action for maximizing SportsCo’s shareholder value was to implement a comprehensive restructuring plan aimed at reducing costs, strengthening operations, and enhancing cash flow.
Links to the other strategic assessment cases:
  1. Private Equity Decides to Exit
  2. Family Commits to Change Program

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