Daily News: June 13, 2012

Conway MacKenzie’s Consult Gives Turkington USA a Fresh Start

Turnaround and restructuring professionals are often called upon to help companies in various states of distress. In some cases, companies are on the brink of total meltdown. This was the situation Conway MacKenzie Inc. was brought into recently, and through the course of 47 non-stop days of effort, a viable North Carolina business was revitalized – and the jobs of approximately 75% of its employees were maintained.

Responding to an emergency funding request from North Carolina-based Turkington USA LLC, a supplier of commercial ovens and baking equipment to the commercial bakery industry, Conway MacKenzie was hired by the company’s senior secured lender to assess the situation and evaluate the merit of the request. Brian Grant, a director in Conway MacKenzie’s Atlanta office, was first on the scene, followed by senior managing director Joseph Geraghty from the firm’s Ohio office.

“We quickly concluded that this additional liquidity would only partially fill the working capital deficiency that had accumulated throughout 2011, without any material amount of new collateral creation,” explained Grant, a certified turnaround professional. “The company was insolvent and, without enough cash to even meet payroll obligations, it was just days away from a complete shutdown.” With this news, the secured lender submitted a motion to the Superior Court of Mecklenberg County, NC, to appoint Conway MacKenzie as receiver. It was approved on February 9, 2012.

Grant estimated that the value of the company in a liquidation scenario could be as low as 10% of the total senior debt balance, due to the fact that customer advance liabilities would likely offset or otherwise diminish the value of the receivables and inventory related to those customers. However, he also believed there was a viable underlying business that was inherently worth more, a theory that would require additional short-term liquidity. After the case was presented to the secured lender, it decided to take the risk and provide additional cash to give Conway MacKenzie the opportunity to sell the business. Without the secured lender support, the business would have been permanently closed.

Conway MacKenzie’s team quickly moved to stabilize the situation and position the company for a sale. The need to maintain a viable organization was delicately balanced with the necessity to minimize the ongoing cash burn. Production was effectively idled, key employees were retained and valuable intellectual property was secured. Given that Turkington’s business heavily relied on several large customers, the Conway MacKenzie experts met with customers to involve them in the process and garner their support of the sale process.

Concurrently, Conway MacKenzie (along with its investment banking affiliate, Variant Capital Advisors) ran a robust marketing process targeted at select strategic and financial buyers. Over the course of just a few weeks, the firms orchestrated a fast-paced process; on several occasions, multiple interested buyers were on-site at Turkington at the same time. Ultimately, despite the expedited time frame, eight parties performed due diligence and multiple non-binding offers were received.

On March 13, The Middleby Corporation, a global provider in the food service equipment industry, closed on two transactions that provided for the purchase of substantially all assets of Turkington for $10.25 million. In addition to Middleby’s willingness to move quickly, they retained approximately 75% of the workforce and kept the operations in the existing facilities. Middleby is also planning to invest new resources to take the business to the next level.

“Overall, this outcome was a great success,” observed Greg Charleston, senior managing director and leader of Conway MacKenzie’s Atlanta office. “The exemplary consulting work included all the elements of a successful turnaround situation, including short-term financial and operations management, forecasting and articulation of strategic opportunities, communications with customers, creditors, and other stakeholders, and negotiation of a transaction.”

“This project included every element of a turnaround situation that a consultant in my field could hope for,” added Grant. “It was, hands down, one of the most interesting, fulfilling, fast-paced deals I’ve ever been involved with. It’s extremely satisfying to help revitalize a business that’s on the brink of dissolution and reposition it for a successful and prosperous future.”