CASE NO. 60
International restructuring and turnaround in the Mittelstand
INITIAL SITUATION
The turnover of an internationally active, medium-size German pharmaceutical company with affiliates in Europe, Asia and USA had been receding for several years. The losses of the previous three years had eaten up the equity almost completely without proper countermeasures being taken. Turnover was currently at about 250 million Euro.
CHALLENGE
The trend towards self-medication in Germany had been missed out on. No new products had been launched for several years. The cost structure of the company was not competitive, production capacities were utilised insufficiently. The affiliates abroad were acting independently from the main office and delivering low profit contributions only. One production company was persistently unable to deliver.
SOLUTION
A complete reorganisation of the company was necessary, restructuring sales, new branding, product line trimming, capacity adjustments in production and administration in particular. Adjustments had to be made especially in Germany: 40 % less stock keeping units, reductions in working capital by 40 % , material costs by 20 % and personnel by 50 % . At the same time the international business was optimised to yield the majority of profits. A capital writedown and the replacement of the majority shareholder made these changes possible.
RESULT
Within one year losses in turnover were stopped and a black zero achieved before restructuring expenses. The second year was concluded with positive earnings and revenues growing again. The sale of the company to a strategic investor six years later earned the invested capital twelvefold.
