Situation

Craig Alexander Rattray was introduced to the operational management team of a “soon to become” insolvent company and asked to perform an “Initial Review” exercise for a potential Private Equity Investor at extremely short notice.

Task

The potential investee company had an excellent long-term plan and platform to develop profitably.  However, short-term cash flow issues meant that there were various obstacles to overcome, to ensure that the company was still trading by the time the Private Equity investment was received.  It was expected that a short-term cash injection may be required in advance of the larger Private Equity investment.

The company operated in a market with high barriers to entry and had a range of protected Intellectual Property.  Contract timings and the ability to deliver on time, and within specification, were vital.  The lack of cash had severely impacted on the company’s ability to meet supplier payments and fulfil its agreed contracts.

Action

The Initial Review for the potential investor covered the following key areas:

• detailed review of the short-term cash flow
• quantification of the short-term cash requirement
• high level review of the longer-term projections
• quantification of the longer-term cash requirement

The Initial Review highlighted the following:

• the short-term cash requirement was more than anticipated and was required sooner than expected
• large elements of the longer-term income and potential new contracts were based on hope rather than expectation, and these needed to be revised and updated to reflect recent changes
• there were a number of errors within the long-term projections
• there were some management weaknesses and the need to expand skills and expertise in some areas

We also assisted in revising the company’s short term cash flow models and in the preparation of a rolling 13-week Cash Flow Forecast that the company continues to use on an ongoing basis.  We highlighted various weaknesses in the longer-term model and the key areas of uncertainty within the longer-term plan.  These were reviewed and the model updated.

We were able to satisfy ourselves that there was indeed a viable, highly profitable and extremely valuable business that merited the short-term “bridging finance”, and that the investor should perform additional work to confirm the longer-term expectations.  We were asked to assist in this process and worked with the management team and the Private Equity Investor to address the areas required and ensure ultimate receipt of the seven-figure investment.

Craig Alexander was been retained on a part-time basis to assist the company in its growth and development, and played a key role within the Strategic Financial Management of the company.

This Case Study shows the ability of CR Corporate Solutions to meet immediate requirements, exceed expectations and adopt a flexible approach to meet client needs.