A Successful MRO Distributor Restructuring & Turnaround Program

Client Context

A publicly traded mid-market MRO (Maintenance, Repair, and Overhaul) distributor faced declining profits, cash flow shortages, and rising debt. While the company had a strong brand reputation and commanded premium prices across its 350,000+ SKUs, it experienced gradual sales declines and increasing costs since 2016 due to external and internal challenges.

Unlike larger MRO distributors excelling through supply chain capabilities, IT tools, and global sourcing, mid-market competitors relied on customer intimacy. However, the client struggled to compete effectively due to inefficiencies in execution and strategic misalignment.

Key Challenges

• Declining profitability ($7M net income to -$1.7M by 2017).
• Negative cash flow ($5M positive to -$10M).
• Debt increase ($14M drawn from a line of credit).
• Stock price drop ($25 to $14 per share in 8 months).
• Ineffective restructuring plan, lacking aggressive process improvements and leadership changes.
• Weak execution capabilities, lack of accountability, and deteriorating sales force relationships.

Approach & Key Success Factors

EFESO was engaged to analyze the restructuring plan and develop a more aggressive turnaround strategy. Within three weeks, EFESO identified critical gaps and designed an execution-focused approach, centered on three key steps:

1. Strengthening the Restructuring Plan

• Conducted a deep analysis of operations and cost structure.
• Identified top-heavy management inefficiencies and recommended adjustments.
• Revised financial projections to achieve break-even by end of 2018 and profitability in 1Q 2019.
• Instituted a daily Restructuring Command Center to drive execution and accountability.

2. Operational Efficiency & Cost Reduction

• Led a two-phase headcount reduction program in June and November.
• Redesigned special product sales to optimize value and reduce non-core efforts.
• Improved credit approval processes to enhance cash flow management.
• Revamped sourcing and procurement, achieving $3.5M in savings through better volume negotiations.
• Provided logistics expertise when a key project manager resigned, ensuring continued execution.

3. Driving Execution Through Governance & Accountability

• Installed daily performance meetings to monitor progress and accelerate decision-making.
• Established the Restructuring Command Center, involving the CEO and executive team.
• Encouraged cross-functional collaboration to map and streamline processes, reducing inefficiencies.

Results

$900K

In labor savings by June, improving EBITDA by $400K over plan.

Break-even operating income

By end of 3Q 2018, reversing a projected $2M loss.

Positive EBITDA Of $500K

Compared to a forecasted $200K loss.

$1.5M Lower operating expenses

In 4Q, leading to $3M in operating income.

EBITDA of $3.3M

Surpassing bank forecast by $1.5M.

Stabilized net debt

Preventing further financial deterioration.

New CEO onboarded

Fully aligned with the restructuring strategy and execution plans.

EFESO’s structured approach ensured a successful turnaround, restoring financial stability and setting the foundation for long-term growth.