Transformation to a Professional Service Firm
Crisis Turnaround
Transforming and reorganizing a major enterprise technology firm at the
brink of failure, to profitability and then successfully negotiating the sale to
a publicly traded company has been an enormously successful venture for a key
client of The Wasmer Group.
The Issue
A major enterprise technology company was in trouble. It posted a 2.5 million
dollar shortfall in collateral position with its major secured creditor, and was
fending off other creditors as they struggled to survive. Straddled by enormous
debts, pending litigation, ineffective management, excessive staff, and lack of
operating controls, all the while trying to struggle in an ever-changing
economy, the firm appeared to be doomed. They didn't see the early
warning signs.
The client's market was very competitive and rapidly changing, with new
technologies obsolescing existing ones at an unprecedented rate; additional
market pressures were being exerted from every angle to reduce costs. The company had
major hemorrhages and appeared to be losing its pulse.
The Solution
Mere survival became crucial. The team at The Wasmer Group took control as CEO
of the company. The key was to stop the bleeding and to apply quick corrective
surgery. We restructured the company, negotiated for temporary relief with
secured lenders, redirected marketing and sales efforts, and concentrated on
profitability.
Within 60 days, the Wasmer team was able to restore cash flow and regain
profitability, while negotiating to find a unique acquisition partner who could
align its business model to quickly capitalize on the intellectual capital of
the restored firm. A sale was negotiated and the deal closed within 90 days from
engagement date.
The Result
The result of the engagement was a synergistic
combination of two firms. It produced an enormous
increase in shareholder value for the acquiring firm
through building its capabilities and expanding
their market area.
Increasing Shareholder Value
Transforming the shareholder value of a technology company seven-fold within a twelve month period came as no surprise to The Wasmer Group.
The Issue
Suffering from an increasingly competitive market,
lackluster performance of its sales force, and
marginally utilized technology services division, the
firm looked to The Wasmer Group for answers and a
strategy to boost its performance and value. Net income
was slightly less than 1% and the value of the company
hovered around the four times earnings mark. After
twelve months of extensive restructuring the company has
emerged with an offer over seven times the value of the
company a year earlier.
The Solution
Through a consulting engagement with The Wasmer Group,
the firm was totally reorganized through:
- Rebuilding its entire Sales Force,
- Acquiring the intellectual capital necessary
to capitalize on the constant state of flux in the
new era of e-business and technology,
- Increasing its technology services division into
a consultative professional services firm, and
- Concentrating on improving the internal systems
to achieve the goals laid behind the strategic plan
built to increase the value of the company.
The Result
Within twelve months under Wasmer direction, the
company has achieved a valuation (substantiated through
a letter of intent) of seven-fold its original valuation.
This was accomplished through a 120% increase in revenue,
an increase from .8% return on sales to 4.5% return on
sales, with an additional 120% sales increase projected
for the next fiscal year.
Helping a company capitalize on the opportunities,
focus on its core competencies and reinvent themselves
to succeed in today's rapidly changing technology market
comes natural to the Wasmer Group. The Professionals at
Wasmer specialize solely in the technology industry and
can help you achieve your goals to deliver shareholder
value.
The Issue
A traditional technology reseller, like many others,
had been facing declining margins on hardware as a
result of commoditization of the PC, fierce competition
from B2B eSales and direct sales efforts by manufacturers.
Shrinking margins, increasing costs, and minimal if any
profitability, were forcing the shareholders to reconsider
their investment, until they entered into a consulting
engagement with The Wasmer Group.
The question asked was "How do we deal with the ever
growing IT sophistication of our clients, the ever
growing complexity of the solutions available and the changes in the
industry happening at lightning speed"? The solution...create a Professional Services
Firm.
The Solution
Succeeding in this business climate required the
company to change their mind set from just selling technology to solving
business problems. The firm needed to be able to recognize and
capitalize on
opportunities. It required devoting the time to develop
the correct diagnosis of the available opportunities,
putting in place the infrastructure and acquiring the
intellectual capital necessary to capitalize on those
opportunities. It was also necessary to reinvent and
reposition the organization in the marketplace.
We at The Wasmer Group offered the expertise of our
firm and our 15 years of experience in the IT industry to
help this firm, and many others like them, to
quickly and effectively refocus to capitalize on market
and competitive shifts. We changed the culture to a
professional service firm, which required specific
communication of the plans to the key individuals of the
organization. Mechanisms were installed to gather
feedback and measure acceptance both internally and
externally. We defined the model, developed the targets
and goals, and measured performance.
The Result
This recent engagement, which transformed
a traditional reseller to a Professional
Services Firm, produced a 10-fold increase in
service revenues along with an increase in the
utilization rate from an industry typical 40%
to almost 90%. The company's net income improved
from a loss of 1% to a 7.4% profit on total revenue.
