Post-M&A for a listed plastic manufacturing group

The challenge

A publicly listed plastic converter manufacturing group faced significant challenges following an acquisition, encountering complexities across multiple levels of integration. Post-acquisition, the group experienced financial losses, and cash generation became insufficient to meet bank loan obligations.

Turnover declined from $500M to $400M, while the workforce stood at 2,200 employees. In response, the board of directors sought urgent strategic interventions to mitigate post-M&A challenges and restore financial stability, ensuring sufficient cash flow to settle outstanding debt.

Solution

A comprehensive transformation and strategic program were developed to enhance profitability across business lines. Each entity was analyzed separately, allowing for the design of tailored strategies aligned with the unique challenges and opportunities of each product and service.

The primary objective of the meetings and workshops was to implement cost reduction measures and drive profitability, ultimately strengthening the company’s liquidity and solvency. Concurrently, a financial strategy was established to restructure bank debts, renegotiate supplier terms, and conduct a financial cleansing of the balance sheet, focusing on the reconciliation of each item in the trial balance to ensure financial accuracy and stability.

Implementation

The ERP system was restructured and implemented within a short timeframe to accommodate essential reporting capabilities, enabling data-driven decision-making and tactical execution to enhance profitability.

A growth strategy was introduced, focusing on sales expansion through exports and market penetration, either locally or internationally, for a targeted business line. Simultaneously, a cost reduction program was initiated to eliminate waste, upgrade technology, and streamline inefficiencies, ensuring operational effectiveness.

The transformation plan also included spinning off non-core services or entire business lines, optimizing the company’s focus on high-value segments. In parallel, engagements were initiated with local, regional, and international banks to secure new financing and reschedule existing debts based on anticipated cash flows generated from the newly adopted strategy

Achievements

Within two years, three business lines successfully transitioned into profitability, prompting the board to approve capacity reduction in one manufacturing facility while shifting operations to a strategic location. Additionally, the board sanctioned the spin-off of a business line, with a structured 70% share sale, following the completion of due diligence.

As a result, the company significantly reduced its losses and is projected to achieve profitability soon. Liquidity is expected to improve, ensuring the group’s capability to settle outstanding bank debts.

From a financial perspective, all post-acquisition challenges were resolved, supported by a comprehensive financial cleansing process that included the reconciliation of all reporting structures. A key outcome was the identification and execution of one-off transactions totaling $20M in expenses, improving financial transparency.

The company successfully rescheduled loans, doubling the repayment period to seven years, while negotiating improved terms, including lower interest and cost rates.

Investor confidence strengthened as the share price surged 50% above par value over two years, reversing its prior decline of 30% below par value, reflecting the positive impact of the strategic restructuring efforts.