Over the past 30+ years, Mel Pirchesky has had a wide variety
of leadership experiences in companies facing financial challenges. His expertise
in management, team-building and identifying the key issues to
address has resulted in a number of positive turnaround experiences.
The following examples illustrate how Mel has worked with companies that were operating with barely marginal success and were in significant danger of closing.
Within a relatively short period of time, these companies began thriving with personnel who were developed to sustain that success.
The Spring Team (www.SpringTeam.com)
The Spring Team manufactures specialty springs used in flashlights,
ATM machines, and a number of other small applications. Eagle
Ventures and its co-investors purchased the Spring Team in August
1990 when the Company was profitable, with $2 million of revenue
and 25 employees. It operated out of a former gas station, having
been started about 15 years earlier.
Two weeks after the Spring Team was acquired, Saddam Hussein
invaded Kuwait, consumer confidence fell, and within one month
of our purchase, the recession of 1990-1991 began. Sales at the
Spring Team quickly fell by 22%, distinct from rising as forecasted
in the projection that was one of the factors used to justify
the acquisition. The Company generated significant losses with
the precipitous drop in revenue. In eight months, the Company
lost $300,000. The Company was in violation of bank covenants and at
risk of the bank calling its loan.
Mel took over day-to-day operating responsibility and within one year after the acquisition, the Company turned around and became profitable. We held the Spring Team as an investment for seven years. In 1997, Eagle and its partners sold the Company to management, returning a profit to Mel and his co-investors. Subsequently, the Spring Team built an adjacent 15,000 square foot facility and is prosperous today, with (profitable) revenue greater than $5 million.
The largest independent shareholder/co-investors in the Company said
the turnaround “… would make a good Harvard case
Allegheny Container was a corrugated box company. Eagle and its
co-investors acquired the Company in 1992 from the entrepreneur who
founded it fifteen years earlier. At the time of the acquisition,
the Company was profitable, had $4M in revenue and 45 employees.
With the acquisition, Mel hired a new CEO to run the business. Subsequently, the Board realized it had made a mistake in hiring him. Among other issues, the Board discovered that the new manager had misrepresented himself in his interview with the Board. We then terminated him. During his less than one-year tenure, the Company incurred unexpected losses that accumulated to $600,000, a considerable amount of the $2M in equity that had been invested in the Company.
Working closely on a daily basis with a new manager, Mel and the Board achieved Company breakeven without an infusion of additional capital, relying primarily on considerable cooperation from Allegheny’s suppliers.
Allegheny Container was eventually sold in 2005 when the Company
had $7M of profitable revenue and 65 employees. The ownership
group made a profit on its investment.
Dawar Technologies (www.Dawar.com)
Dawar is a 120-year old company. It was acquired in 1997 from
an individual who had owned it for nearly 40 years. The Company
manufactured electronic touchpads, having $2.5M of profitable
revenue and 30 employees at the time of the acquisition.
Subsequent to the acquisition, the Company moved from the top
three floors of an 80-year old building to a single-floor facility,
and simultaneously implemented a complete replacement of its
ERP (enterprise resource planning) computer system. At the same
time, due to inattention around the time of the closing of the
acquisition, the Company lost half of its business from its largest
Net losses ensued, cresting at $50,000 per month. Mel then took
over direct day-to-day management of the enterprise. After six
months of an aggressive sales campaign and a series of cost cuts,
we restored the Company to positive cash flow, with a significant upward swing in annualized earnings from Dawar’s low point. Subsequently,
a permanent manager was hired.
Today, the company is generating profitable annual revenue at
a rate greater than $12 million, with a diversified product line
that includes touchscreens and electronic touchpads
with growing profits and a team that exceeds 50 members. Eagle sold its investment in 2015.
C&K Manufacturing and Sales, L.L.C.
C&K had been in business for forty years. It manufactured cutting boards for commercial food operations, and imported vinyl, latex and special-purpose gloves and floor mats for customers in this niche..
When the current owners purchased C&K in
2003, it had $13M in revenue and 21 employees.
Six months after the acquisition of the Company, the owners
found themselves incurring losses of $70,000, $80,000 and even
$100,000 per month. They subsequently hired Eagle Ventures and
Mel to turn the Company around.
At the time the turnaround project commenced, Eagle’s
due diligence identified several major factors contributing to
the losses. Overall gross margin had dropped to 5%, with the
largest customer, accounting for 15% of the business, having
a 2% gross margin. Fifty-five percent of the Company’s
revenue was generated from customers having zero or negative
gross margins. Inventory was in short supply, resulting in constant
out-of-stock occurrences. Employee morale was low, and the employees
were blaming each other for a number of internal issues.
Eagle led management in raising prices on an account-by-account
basis and implemented a new compensation program, wherein salespeople’s
bonuses were based upon incremental contribution margin dollars
rather than the previous approach based on gross revenue.
Under Eagle’s leadership, using a number of new strategies, the Company had a significant upward swing in
cash flow and had its first profitable quarter in the second quarter of 2005, nine months after taking over control.
Subsequently, C&K was sold by the owners, experiencing a ‘soft
landing' in their ownership handoff, rather than having to deal with an impending bankruptcy.