FBM assisted in the restructuring, relaunch and refinancing of an international fashion company
With acute liquidity problems or a threat of bankruptcy, restructuring is often the way to a new future. A 30-year-old family business had become structurally loss-making. FBM was called in to guide the company with financial advice.
The company had grown into an international player in women’s apparel. They supplied both retailers and directly online to consumers. In recent years, losses had risen sharply. Unfortunately, the various measures had not resulted in a turnaround to profitable operations. The pressure on liquidity had increased to such an extent that drastic measures had to be implemented quickly.
The company consisted of a holding company and 4 operating companies; ‘Company’ Europe B.V. (hereafter BEU), ‘Company’ Ladieswear Netherlands (hereafter BDNL), ‘Company’ Ladieswear Germany GmbH (hereafter BDD), ‘Company’ Ladieswear UK (hereafter BDUK) and an online web shop; 24/7 B.V. At the time FBM became involved, BDUK and BDNL were so loss-making that bankruptcy was insurmountable. Management subsequently filed for bankruptcy itself.
In contrast, the operations of “24/7” and Company Ladieswear GmbH offered sufficient prospects for continuation after a carve-out of the unhealthy parts of the group.
The ‘Company’ had been experiencing negative operating results since 2015. In 2017, the ‘Company’ was audited by another financial agency, on the recommendation of the ‘Company’s’ bank. Almost all proposed measures were fully implemented by the management in 2 years. Unfortunately, the measures had insufficient effect. The original business model proved too inflexible and cost intensive.
Also in 2019, the “Company” still remained heavily loss-making. After BDNL and BDUK also continued to suffer substantial losses in the first two months of 2020, but the two business units 24/7 (webshop) and BDD, on the other hand, recorded positive results, the switch was made. The encouraging results at 24/7 and BDD offered sufficient perspective for healthy operations after a restart.
At the time FBM came into the picture, in addition to the bank credit, there was an outstanding debt from BDNL/BDEU to the founder of approximately € 1.2 mln. This debt position of BDNL/BDEU to the founder combined with the limited bank credit and the ever increasing creditor position of € 1.4 mln made the situation untenable. A carve-out of the unhealthy parts by filing for bankruptcy of BDNL/BDUK became unavoidable when the losses could no longer be stopped and the debt positions continued to rise.
Relaunch to ‘Company’ 2.0.
With change of business model to ‘Company’ 2.0, they started to focus solely on design, marketing and sales. Production, packaging and logistics had to be outsourced. The new flexible and smaller organization was much better able to anticipate changing market conditions and increasing competitive pressures.
Because the company now concentrates exclusively on design, marketing and sales, it needs far fewer personnel. Personnel for production, handling and logistics were parted with the relaunch. This was one of the most difficult decisions in the process. Many of the staff had become more or less part of the family after many years of service. It was an extremely difficult decision that also greatly affected the founder afterwards. But necessary to achieve new perspective for the company.
How is it going now?
Already in Q3 2020, all expectations are exceeded. Sales throughQ3 were budgeted at €3.7 million and turned out to be €5.7 million. A plus of more than 40%! Teething problems in the new organization and reorganization costs still weighed on profitability, but the financial perspective is again excellent.
Disclaimer
To ensure discretion, the names, business activities and also the figures in this case have been anonymized. But they are fully representative of the real situation.
