Case Studies - Fractional CFO

Company Tragically Loses Key Managers

A chemical distribution company was rocked by the traffic death of the married couple that made up the ownership and management team. Management and partial ownership fell to the 27 year old son.

Challenges

  • The son had inherited only a minority interest in the company. Ownership was muddied due to unique circumstances of simultaneous death of owners and considerable acrimony among the heirs. It was a second marriage for both and there was another sibling and several step siblings who suddenly had ownership interests.
  • The son had only been employed by the company for a little over a year, and his role was primarily in technical support. He had no previous management experience and very limited experience in essential areas of the business which included purchasing raw materials and managing the pricing structures of the distribution network that accounted for 40% of revenue.
  • The son’s compensation level was not reflective of his new found responsibilities and increases were subject to approval by other shareholders
  • In an effort to capitalize on the tragedy, competitors immediately began making sales calls on larger customers, suggesting there would likely be disruption in service and supply and extolling the value of shifting purchases in their direction as a prudent safety net.
  • Son was unsure if he wanted to purchase majority position in business or pursue other career options.

Solution

  • Referred by the company’s lender, Lauber Business Partners drew from its broad based team of professionals and assigned an experienced CFO who had direct industry experience to serve as a mentor to the young owner,
  • In addition to being a 24 / 7 sounding board, the Lauber Business Partner functioning in an advisory role:
  • Made some of the more difficult sales calls jointly with son.
  • Introduced new sales pricing models for distribution network.
  • Supplemented raw material purchasing strategies to maximize margins.
  • Communicated with minority shareholders and helped secure adequate compensation to insure continued involvement of the son.
  • Reviewed the handling and storage of raw materials and finished goods to make sure there were no hazardous waste or real estate contamination issues.
  • Eventually son decided he wanted to do something different with his life, at which point the Lauber Business Partner in concert with the other owners and the company’s attorney:
  • Developed a business summary, a sort of a quasi “prospectus”, that was sent to prospective buyer
  • Prepared customer and product lists as well as sales history for interested buyers who had signed confidentiality agreements.
  • Put severance / retention bonus plans in place for key employees to insure continuity of operations until the sale was consummated.
  • Identified and met with prospective buyers
  • Solicited and evaluated 3 offers.
  • Responded to due diligence requests and questionnaires from the winning bidder.
  • Negotiated terms of the sale.
  • Negotiated employment contract for the son.

What this meant to company

  • Using his Lauber Business Partner as an advisor and sounding board, the son did an excellent job of stabilizing the company, and in fact his management resulted in near record profits in his first year.
  • Increased profits drove an increased enterprise value. As a result the shareholders’ investment was not only preserved but enhanced.
  • The transparency and thoroughness of the sale process satisfied minority shareholders, diffusing a potentially litigious situation.
  • Son secured an employment contract and position in acquiring company that interested him and provided upward mobility

The value of a Part-time Lauber Business Partner

  • Extensive domain expertise in senior financial position.
  • A trusted advisor to owner/CEO on many matters.
  • Looks at business through perspective of maximizing competitiveness and long term enterprise value.
  • Extended tenure with clients helps develop stronger financial and business acumen for client’s leadership team.
  • Extensive experience with sales and acquisition.