Situation
A $50 million direct marketing firm was losing money, accounts, key sales reps, and an internal battle with an information system which seemed designed to prevent business, rather than facilitate it. The principle shareholder/CEO was acting irrationally. Key employees convinced the board of directors to hire Matrix to do a Rapid Situational Assessment. Based on our projection of an imminent cash crisis the board hired Matrix to effect a turnaround.

Matrix Action
Matrix took immediate executive control of the business. We added detailed research to the situational analysis and opened lines of communication with key lenders and vendors. We revamped the sales floor, putting new leadership and rules in place. We launched new market initiatives, settled dozens of outstanding lawsuits, all in the company’s favor, renegotiated lease terms and reduced fixed costs, bring operational costs within cash flow. We negotiated with a key strategic partner to free up cash to invest in a state-of-the-art computer system that was sales friendly.

Result
Within 9 months the firm was generating more than $100K/month in operating profit and on its way to a record year.

Situation
Faced with the alternative of becoming family pet doctors, a group of Minnesota veterinarians took it on themselves to save family farm livestock production in rural Minnesota. Bringing science, medicine, and organizational skills the veterinarians put together a collection of farmer-owned companies to breed top quality livestock. They created a leading national artificial breeding operation and structured companies to manage labor, transportation, feed, packaging and marketing. Carefully following Minnesota's strict family farm laws, the veterinarian organized to flow profits downstream to the farmers-owners.

The operations flourished, growing from nowhere to the 14th largest pig production operation in the country. Then disease and a disastrous market took its toll. Production dropped and costs rose. The principle lending bank changed hands and the new owners saw a debt package far in excess of liquidated value. While the operation was current in debt service, the bank, under pressure from regulators, began to make noises about not renewing the loans.

The veterinarian, seeing their entire successful operation in jeopardy, called in Matrix Associates.

Matrix Action
Matrix conducted a thorough analysis of all financial operations; looked at the market; and reviewed the steps the veterinarians had taken to curtail disease and bring production back to normal.

By building detailed cash flow projections for each of the many operating units, Matrix was able to show the bank exactly how much debt the system could support. Using these projections as a guideline, Matrix negotiated with the lead bank to reduce total indebtedness as an incentive to find a new lender. The bank agreed to a multi-million dollar write-down, representing 45% of the loans outstanding.

Matrix presented the recovery plan to alternative banks. While much improved, the loans were still substandard. But Matrix got a new lender to take the package based upon merger of the small operations into larger units, with the effect of mitigating disease and production risk throughout the system. Days of tough negotiations resulted in terms and conditions that were acceptable to all parties. Then Matrix undertook an intensive campaign to sell the new structure to the farmer-owners gaining a unanimous vote in favor of the restructured production units.

Result
Livestock operations are humming. Production is approaching record levels. Markets are beginning to recover and family farming survives in Minnesota. Matrix Associates and the Veterinarian group are working to further strengthen the operation to assure that Minnesota family farmers can continue to compete with the megalithic agribusiness corporations that dominate livestock production.

Situation
A core Matrix belief is that all problems relate to growth -- too much, too little or too cyclical. The CEO of a local medical products company experienced the best growth problem -- too much growth. While sales and profits soared, company personnel were totally consumed with executing the day-to-day tasks necessary to meet product demand. An extra burden was added when the company decided to go for the CE mark that would allow export to the entire European Economic Community. The CE mark requirements included implementation of ISO 9000 standards. ISO 9000 also required the company to have a strategic plan.

The CEO hired Matrix Associates to help him structure a long-range strategic plan that would draw the diverse segments of his business together, fill his ISO 9000 needs and provide a foundation for negotiating with underwriters for a secondary stock offering.

Matrix Action
Matrix conducted an in-depth investigation of the company's diverse markets and technologies, traveling to remote facilities to investigate technologies and business operations. Matrix developed a detailed set of strategic issues and brought together operation management to address each issue. As the issues were resolved, a short and long term strategy was developed which became the basis for the company's strategic plan. The plan addressed all of the critical areas -- marketing, regulatory, research and manufacturing, helping the company focus its energies and direct its resources for long term success.

Result
The plan provided a structure for discussions with an underwriter who subsequently underwrote a successful secondary offering at nearly three times the originally anticipated price.

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Situation
The CEO/owner of a large, diversified manufacturing firm derived more than 30% of his revenues as a dedicated "out-source" for a Fortune 100 company. One product that his company assembled had a large molded plastic component. The owner determined that if he made the component he could substantially increase profits. However, to make the component would require a capital investment in excess of a million dollars with no guarantee that his customer would by the component from him, rather than the current supplier.

Matrix Action
The CEO hired Matrix Associates, Inc. to perform a "make-versus-buy" analysis. Matrix researched the market and determined that this segment of the plastics industry was a high growth, very fragmented niche, comprising small entrepreneurial operations. There were several suitable businesses within the geographic area that could be purchased for a reasonable price. To start up an operation, however, involved a large capital investment plus the acquisition of knowledgeable management and technical staff. More critical was the need for a sales staff -- an area where the CEO's company was weak because so much of its business was captive.

Matrix recommended an acquisition and identified three potential candidates. Due diligence narrowed the field to one prime candidate and a back-up candidate.

Negotiations were initiated. The current owner wanted an unreasonable price. Matrix got both seller and buyer to agree to a valuation-based purchase, driven by an agreed-to set of assumptions. Matrix performed the valuation and both sides accepted the general parameters of the price. Matrix led the team to resolve other outstanding issues and the acquisition was made.

Result
The plastic molded part that had initiated the decision to go into plastics was discontinued as the technology of the assembled piece advanced. Despite the fact that it never got this expected new business, the plastics business grew rapidly and both revenues and profits far exceeded the new owner's projections.

Had the CEO followed his instincts and built his own plastics capability, he would have had huge investments and idle equipment. By following the Matrix "buy" recommendation he added a new, high-grow/high-profit business to his diversified enterprise.

Situation
The aviation industry is a small, fraternity that traditionally does business in a lavish manner. As a result, the number of businesses serving the industry has steadily declined, with few of the remaining firms turning a reasonable profit.

A small manufacturing company devised an automated aviation service system that reduced costs, promoted safety, and protected the environment. It promised to help turn around an industry in decline. But the good old boys of aviation would have none of it and gressively tried to block the use of the systems.

Matrix Action

The firm hired Matrix Associates to help it form a successful business strategy. Matrix examined the basic economics of the business and quickly realized that the firm could not afford to continue on its own.

Matrix developed contacts with several of the major firms supplying product to the industry, finally settling on one of the larger firms which had a special focus on aviation. Matrix negotiated a strategic partnering agreement where the large firm committed its resources to help the small, innovative firm penetrate the market in return for an exclusive arrangement.

Result

The two firms held a precedent-setting joint announcement at a major aviation trade show and launched an aggressive sales campaign with enormous trade media attention and a great deal of credibility with end buyers. There was significant work ahead, but, with attention to detail and full participation by the Fortune 100 giant, an innovative concept finally had a real chance for success.

Situation
A retired local businessman was in the midst of estate planning with his accounting firm, looking to preserve as much capital as possible when he passed his wealth on to his children and grandchildren. Included in the large, diverse estate were two substantial businesses that had both been managed by one of his children for more than two decades. The obvious estate planning strategy was to have this child buy the businesses under favorable terms, allowing a fair distribution of the value among the siblings. It seemed straight forward, but suddenly things went terribly awry. An offer was made, but the sibling business manager balked at the terms. The other children responded with anger. Legal counselors were unable to settle the dispute and the family members chose sides. Communication among the siblings became infrequent, defensive, and hurtful. The situation persisted for nearly three years and was destroying family relationships. The businessman turned to Matrix for help.

Matrix Action
The family’s first proposal was for Matrix to evict the sibling who was managing the businesses and intervene until they could be sold on the open market. After carefully reviewing the situation, Matrix determined that this strategy would prevent the family from receiving fair value since the current manager was an integral part of the business. Instead, Matrix supported the original goal of encouraging the sibling to acquire the businesses in a MBO. Matrix had a legal document drafted that empowered the consulting team to seize managerial control of the businesses. Then Matrix met with the recalcitrant buyer and presented two options – either negotiate a mutually beneficial purchase or retire. Faced with imminent dismissal, the buyer agreed to negotiate in good faith. Matrix helped to guide the discussions and clear up the many misunderstandings that had formed. Once the buyer and seller both fully understood the other’s concerns, compromises were achieved and the deal closed. The entire process took just eight weeks.

Result
Both businesses are thriving under their new structure. The family is satisfied that the value of the businesses has been fairly distributed. The wounds have healed and the businessman and wife are comforted to have peace in the family once more.

Situation
The National Indian Gaming Act gave Federally-recognized Native American tribes the right to operate Class III gaming facilities (casinos) on their land under negotiated compacts with the host state. The casinos offered a unique opportunity to generate enough wealth to free these tribes from the welfare rolls and provide for the future of their children. However casinos are expensive and few of the tribes had money on hand to invest in the building of casinos. Conventional lenders were afraid to risk their capital because tribes have sovereign immunity and could prevent lenders from seizing assets on tribal land.

A young Minnesotan, with a background in leasing, stepped in and created an agreement under which a tribe waived its immunity for a specific transaction. This overcame the major barrier for lenders and Indian gaming became one of the hottest growth industries of the past decade.

The leasing innovator formed his own company to originate Indian gaming leases and was very successful. However to achieve the full profit potential of the business the entrepreneur needed sufficient capital to season his leases before marketing them to banks and other institutions. Despite his success, he found his own youth and the complexity of his leasing transactions to be a major barrier to attracting equity capital.

Matrix Action
The entrepreneur hired Matrix Associates, Inc. to help him package himself and his company to attract equity funding. Matrix worked with the leasing company team to create a strategic plan that focused on the strength of the financing concept, rather than the creative genius of the company’s founder. The Matrix-generated plan described the complex financial transactions in a clear and simple fashion that helped investors understand how little risk was involved.

Result
Using the plan the entrepreneur attracted an underwriter and staged an initial public stock offering. The IPO raised $8 million for less than half the company’s stock, a market valuation that was more than 60 times earnings.

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Case Study #8

Situation
The R&D investment to gain FDA approval of implantable medical devices is huge. A company that had invested more than $60 million in the process and achieved approval on one device was forced into receivership by a major US bank when it defaulted on more than $40 million in debt. A management team, made up of former and current employees of the company wanted to save the name and technology, but their resources were limited.

Matrix Action
The group hired Matrix Associates, Inc. to help them negotiate a deal with the bank. Matrix negotiated around the clock with the bank’s legal firm and secured an agreement to buy the assets of the firm for 15% of the realizable value of its real-estate, inventory, accounts receivable, and plant & equipment. Matrix then built a business plan that the principals used to raise the necessary capital.

Matrix worked directly with top management to renegotiate supplier and distributor agreements, restructure the organization, and develop an international sales strategy.

Result
The company was back in business in less than 30 days. Costs were brought under control. Unprofitable relationships were severed. Sales efforts paid off with increased sales in Europe and Asia.

In the twenty years prior to its foreclosure the firm was never profitable. After the Matrix negotiated buy-out and following the Matrix developed strategic plan, it was profitable its first year of operation.

Situation
A $50 million telemarketing firm skilled at selling high-ticket items for its clients found itself in a hole and digging it deeper. Flushed with success the firm's founder and key stockholders had invested in a massive building with fixed operating costs four times higher than the firm had previously paid. A significant investment in a new computer system was mismanaged and the custom-designed software made it almost impossible to ship goods on time. Cash shortages made it difficult to acquire new product and sales staff was disgruntled and lethargic. The company was mired in litigation with former employees, suppliers, and marketing partners. By mid-year, losses were at $1 million and climbing. The Company's bank was making noises that suggested credit restrictions and higher interest costs. Management went around the founder and asked Matrix to propose a solution.

Matrix Action
Matrix convinced the board of directors to fund an in-depth study aimed at heading off precipitous action by the bank. The study uncovered a myriad of problems. The Board asked Matrix to assume management control.

Matrix launched initiatives on several fronts. Overhead was reduced through strategic trimming of staff and subletting of building space. Unearned commission guarantees to suppliers were renegotiated and new arrangements structured that promoted growth. Sales was given new leadership, which quickly brought about a new attitude on the sales floor. At the same time, a Matrix-launched effort to increase clients began delivered new products and new customers resulting in a much higher level of sales activity. All outstanding litigation was settled on terms favorable to the Company.

Matrix presented the situation and turn-around steps to the bank and got a reprieve on credit restrictions. Within 6 months the bank actually increased credit lines.

Matrix contracted for a new computer system that mirrored the sales and shipment goals of the company. Company-wide morale, which had been at an all time low, improved dramatically.

Result
By year-end, a million-dollar loss had been cut to $200,000. By early 2^nd quarter the following year when Matrix returned control of the Company to the Board it was posting a $500,000 profit and on its way to a banner year.

Situation
A company built around an environmental-related technology went public and raised $5 million to penetrate world markets and grow its product line. Eighteen months later, sales had fallen to an all-time low, while SG&A skyrocketed. The company was in litigation with both suppliers and distributors. It was in default to the university from which it licensed its technology. Cash on hand would cover less than two months of operation and 80% of accounts receivable were doubtful.

Most sales were to a handful of entrepreneurial “distributors” in the Pacific Rim, with a large percentage of inventories sent on consignment. The company had never passed EPA testing on any of its current products to permit aggressive marketing in the US. The products, which were being distributed in major US retail operations were not in compliance with EPA requirements.

The board of directors conducted a search for outside help. They selected Matrix Associates, Inc. under an agreement whereby Matrix would take over day to day management as well as address the outstanding strategic and fund-raising issues.

Matrix Action
Matrix immediately restructured management to reduce the SG&A burn rate. The former CEO, COO and VP of Manufacturing/Engineering were terminated with minimal severance costs. Outstanding litigation was settled. Supplier relationships were renegotiated. A new distributorship agreement was written and the relationship with existing distributors was restructured with minimal terms. The burn rate was decreased, and sales and cash-flow increased to the level where the company was able to operate for 9 months without additional outside financing despite the fact that 80% of existing accounts receivable were written off as bad debt.

Matrix uncovered EPA problems with the product line and critical product quality problems. Matrix brought in technical expertise to fix the current product line and to begin designing products for the future. Matrix withdrew products that were in violation of the EPA from the USmarket and invited the EPA in for a review of procedures and practices to establish a new, working relationship with the regulatory body. Matrix also restructured the licensing agreement with the university to reduce royalties and capture follow-on technology.

Matrix developed a detailed long range strategic plan showing how the company could apply new capital to overcome its current problems and enter new, high growth markets.

Result
Matrix identified and secured a new group of outside investors to come into the firm and assume management. The company then successfully merged with another firm in its business segment.

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Buyout

Partners were at each other's throats and a $90 million agricultural business was facing loss of its bank lines and eventual foreclosure.  Distrust was intense.  Matrix negotiated a successful buyout of the dissident partners funded by new investors and successfully restructred the company's line of credit.  With the burden of dissention lifted, the company is delivering record performance.

Situation
Three partners launched an enterprise on a shoestring in the mid 1990's.  One partner contributed less than $100,000 in capital; another contributed some livestock and the third, the managing partner, contributed expertise, enthusiasm, and hard work.  Over the next ten years, the company was built into a $90 million dollar a year business production and a top-20 producer in its category.  Meanwhile the passive investors watched the value of their investment grow.

In 2003, for reasons unclear, there was a falling out among partners.  The two passive partners pooled their voting strength and unseated the managing partner, engaging professional, non-agriculture management to run the enterprise.  Performance declined.  The managing partner invested substantial sums to prevent loan covenant violations; nonetheless, the bank informed the company its line of credit would be restructured in early 2004 and unless the dispute were settled, the lender would withdraw from the loan. 

With his own and his family's personal wealth at risk, the managing partner engaged Matrix Associates to help him execute a buyout of the dissident partners.

Matrix Action
Matrix engaged legal counsel both to structure offers and to demonstrate a willingness to take the matter to court.  We reviewed the financial and operational structure, existing partnership and buy-sell agreements and structured a preliminary offer within the buy-sell valuation formula and consistent with then current industry values.  We underscored the dire consequences to all parties ( all notes included personal guarantees), if a successful resolution was not reached. As expected, the first offer was rejected, but valuable insights were gained and the message of consequences delivered.  A revised offer was accepted.

As soon as the offer was accepted and letters of intent signed, Matrix launched the second stage - attracting new equity investors to underwrite the buy out.  Keeping the lending institution in the loop, we were able to go past their deadline for agreement and restructuring, finally bringing in knowledgeable partners who had faith in the managing partner's ability to deliver.  From engagement to refinancing took approximately five months.

Result
The managing partner now holds a majority.  Freed from the distraction of dissention the operation is booming, with production at record levels.  The company is expanding and will likely be a top ten producer within the next five years.

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Market Development

A company that provides unique business services cannot penetrate a Fortune 100 client even though its "product" is needed and is demonstrably superior and priced lower than competing products. The company asks for Matrix's help. Matrix lands a pilot project that leads to a long-term customer relationship.

Situation
The company was formed to supply a key business service that more and more large corporations were outsourcing. It had brought together technology and skills that none of its competitors could match. Use of automation had let the company lower its price well below the competition. Yet the company could still not penetrate a local Fortune 100 target client with an acknowledged huge need for the services. The company turned to Matrix to help it penetrate this market.

Matrix Action
Matrix developed contacts in the target business and gained an audience with the key decision maker. The decision maker had other problems on his mind. Matrix pitched in and helped the decision maker overcome a significant internal problem. In gratitude, even though the decision maker had already assigned a significant portion of the business to a competitor, he agreed to give Matrix’s client a trial.

Matrix oversaw the trial. The client’s personnel were not versed in the culture of the Fortune 100 and nearly committed a major political mistake. Matrix stepped in, smoothed the ruffed feathers, and the trial proceeded as scheduled.

Result
Matrix’s client provided superior service at a very attractive price. In no time, the work flowing to Matrix’s client increased until today, the company has nearly all of the Fortune 100 company’s outsourced business in this area. Matrix helped its client understand the culture it was dealing with and the outsource relationship became institutionalized in the Fortune 100 company’s budgeting process.

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Case Study #13

Turnaround

A $35 million family-owned primary metals supplier was losing ground in a competitive marketplace because family issues trumped business decisions.  Matrix restructured the company, brought in professional management, and turned a net drain into a net contributor to family wealth.

Situation
A sixty-year old family-owned wholesaler of primary metal products experienced a number of losing years in a row, in a market where, in the past it would have made a reasonable profit.  The problems were well known to all.  The family patriarch, well into his eighties, still held the ultimate decision-making authority.  Family members held most of the key management positions and in every situation, decisions were made based on family politics, rather than what was best for the company.  Financial performance put the business in violation of its loan covenants and the bank threatened to pull or restrict the company's credit line, which would sharply impact the company's ability to meet its supply commitments.  The board of directors hired Matrix Associates to help them remedy this situation without tearing the family apart.

Matrix Action
Matrix took active control of the business, gradually easing the patriarch out.  We sold off an unprofitable scrap business, investing the proceeds in desperately needed capital equipment.  Family members were removed from decision-making roles and professional managers put in place.  The sales force was revitalized and sales began to increase.  Unproductive family members were eased out of the business and helped to find other gainful occupations.  Those who performed valuable functions were retrained, but put under professional managers.  Matrix recruited a new CEO and put the revitalized business in his competent hands.

Result
The company successfully rode though the past recession and crisis in the metal markets.  The business is growing, profitable, and capturing market share.  New bank lines are in place.  Shareholder return has increased and the family is pleased with the overall result.