In each of the examples below, we have outlined the situation one of our respected clients faced when engaging our team, the action steps we took to resolve the specific crisis or strategic issue, and the impending results garnered from our efforts.
Long Range Systems, Inc.
Long Range Systems, Inc., the original inventor of the coaster pager and manufacturer of specialized POS systems, RFID-based hostess management systems, and other technology applications catering to the restaurant industry initially engaged Victory Partners to raise investment capital in order to support the launching of a new, revolutionary interactive technology to replace the industry’s legacy applications. Soon after being engaged, our team determined from our initial due diligence that our client was truly in crisis mode. As it turns out, one of the company’s shareholder/managers was operating a separate, competing business without the knowledge of remaining shareholders while utilizing company assets and relationships to his own benefit. Furthermore, this individual was the sole point of contact with the company’s off shore contract manufacturer.
The company could not close-out its books, nor garner an independent audit, given the complete disarray of the company’s financial management systems and records. Exacerbating the issue, the company had reinvested most of its earnings into R&D on products that were never profitable, nor could gain traction within the company’s prodigious customer base, giving no consideration to return on invested capital.
Because the CEO of the company maintained a personal relationship with the president of a local community bank, LRS could not procure the necessary credit terms it needed to finance its cash conversion cycle or generate adequate gross margin. Most importantly, there were no controls in place to hold each business unit accountable for results and LRS’s sales were being generated primarily by one sales person, even though the company staffed in excess of 10 at any one time. Lacking proper systems and management tools, coupled with reliance on one manufacturing partner and one key sales professional, the company was held hostage and could not garner the capital it required.
As part of our engagement, the Victory Partners team was able to quickly recruit a highly qualified Chief Financial Officer with extensive and relevant experience. Working side-by-side, the new CFO and our team immediately began implementing proper controls and processes to stem the free outflow of cash and to focus the management team on positive NPV projects. In addition, Victory Partners developed and executed a strategy for removing the recalcitrant partner in a judicial manner without compromising certain key relationships that were under his control at the time. Next we assisted our client in expanding relationships with key suppliers in China and renegotiated per unit costs and volume incentives. Then we stripped-out the company’s core pager business, which was generating significant recurring revenue and cash flow, and structured the other business units to be self-sustaining within 6 months. Our team dissected the company’s revenue models on all current and future technology applications and revamped LRS’s pricing model. Lastly, Victory Partners worked with several different investors in our efforts to position the company for further success and negotiated a settlement of a lingering right of first refusal held by one of LRS’s competitors previously curtailing any efforts to garner expansion capital or sell the company.
Visit: www.longrangesystems.com
Intelegy, LLC
Our client, located in Northern California, was a rapidly-emerging outsourced CRM and Call Center Company that provides its clients with a proprietary software platform, CRM Consulting, and Call Center management and staffing. We were retained to explore the company’s strategic options relative to entering new business lines, partnering, raising expansion capital, and repositioning the company for an eventual exit strategy. Through an exhaustive analysis, Victory Partners soon learned that Intelegy as 1) Mis-pricing its product and software offering, 2) Taking on un-profitable business that placed serious strains on resources, 3) Not managing its relationships with its lenders appropriately (in default w/ financial covenants), 4) Carrying “bad” receivables on its books, representing 20% of current assets, 5) Not capturing “pay-back” in capital investment, 6) Subsiding non-performing shareholders, and 7) Ineffectively selecting new markets to penetrate.
One of Victory Partners’ leaders assumed a seat on the company’s board of directors and immediately undertook the tasks of divesting its staffing business, developing a new strategy geared toward recurring revenue at proftable levels, buying out under-performing partners, retrenching its geographic expansion to focus on key markets, partnering with Intel’s Dialogic Business Unit to develop a web-based, fully-integrated IP/Telephany CRM solution, renegotiated with the company’s lenders to bring Intelegy back into compliance, and negotiated the restructuring of several key receivables. These initiatives placed Intelegy in a position to procure expansion capital from India (while outsourcing its staffing component overseas, as well) and increase its revenue by 25% annually and improve gross margins by 12% over the previous year. Most importantly, Intelegy developed a focused strategy that drastically improved its value proposition. Today, Intelegy is a recognized leader in its field.
Visit: www.intelegy.com
HCB Enterprises, Inc. d/b/a Bibbentuckers
Our client, headquartered in Dallas, Texas, is a multi-unit high end dry cleaning operation headquarted in Dallas, Texas. The revenues generated by Bibbentuckers’ locations exceed by roughly 10X the national average for dry cleaners. Unfortunately this well known Dallas brand incurred large annual losses since its inception in 1996 and in 2001 promoted Mr. Bishop to COO and asked him to lead a financial turn-around of this struggling business. After leading a successful turn around and shepherding the Company to maximum profitability and debt reduction the Board of Directors in 2006 asked Mr. Bishop to sell the Company. Mr. Bishop turned to Victory Partners LLC to assist Bibbentuckers in a sale transaction.
Victory Partners worked closely with Bibbentuckers management and Board of Directors to develop a detailed strategic plan for taking Bibbentuckers to market. Through its numerous financial sources and the development of a very thorough pitch book, Victory Partners was able to identify qualified strategic and financial buyers. Because of the professional efforts of Victory Partners, Bibbentuckers had the luxury of choosing from multiple suitors to achieve maximum return for the business. The Company agreed to terms and was sold in February 2007.
Visit: www.bibbentuckers.com
Computrition, Inc.
The founder of Computrition, Ellyn Luros, contacted Victory Partners initially seeking capital to buy-out several investors in her company, who were skidish about the company’s future based on its inability to pay short-term dividends. The company began as a nutritional consulting firm but “morphed” into a software company as it developed a highly-robust program originally used as an aid to its consulting practice. Our analysis concluded that the company’s product was revolutionary and in high demand, but the company struggled with major internal issues, such as: 1) Remote software development staff with no controls or accountability, 2) improperly incented sales staff, many severely under-performing, managed from remote locations with individual authority to commitment production resources, 3) poor accounting methodologies created inflated EBITDA performance, 4) pricing methodologies resulted in sizeable deferred revenue component thereby over-leveraging the company, 5) the company had no release schedule for its software and had 50% of its receivables tied-up with beta clients holding back their payments, 6) the company’s tolerance of several nepotistic relationships adversely impacted morale, 7) poor cash management stifled the company’s relationships with key vendors, and 8) investors were beginning to force management’s hand in making decisions based on “dividend policy” and not enterprise growth and value.
Victory Partners immediately embarked on developing a strategic plan that shifted the company’s focus from a “onezee-twozee” sales approach to a channel approach, negotiating a strategic alliance with the Dutch company Royale Ahol, PLC to access their customer channel. We created a new approach to pricing that completely eradicated deferred revenue and created recurring revenue opportunities while negotiating to outsource many of the product development functions. Working with both existing clients and the company’s internal development team, a new “product release strategy” was created and upgrade sales were shifted to an internally managed team. We were also influential in reshaping management through a combination of lay-offs and restructurings that eliminated the nepotism issues and drastically improved morale. These initiatives had the effect of staving-off investors short-term demands, which shored-up badly needed capital and positioned the company to engage in a new banking relationship with Comerica. Furthermore, one of our team members was recruited (with our blessing) to join the company as its chief financial officer. Computrition thrives today as an industry leader in its field.
Visit: www.computrition.com
Natures Formula, L.P. & Related Companies
Nature’s Formula engaged Victory Partners as its advisor for a corporate sale. Meanwhile, the discovery of embezzlement within the company threatened the sale of the company as well as the company’s existence, as it hinged on bankruptcy. Victory Partners relied on its consulting and financial and strategic advisory capabilities to protect the company from bankruptcy through shrewd negotiating with trade vendors as well as establishing numerous other protections. The company was saved and a corporate sale was completed.
In early 2005, my corporate attorney introduced me to Victory Partners, LLC and had originally suggested that I hire them to advise us of options to finance our astronomical growth expectations while allowing me the opportunity to liquidate a sizeable portion of my investment in my company. One year later, my whole world changed. I am 72 years old and found out that, over the previous three years, my company had become the victim of a $4.0M embezzlement scheme that ultimately placed Nature's Formula in financial dire straits. Our trade suppliers stopped shipping to us, our bank halted advances under our line, a competitor began raiding our employees, and our blue chip clients put us on notice that they intended to begin bidding out their manufacturing with competitors. We had 90 days to come up with a plan or the bank was going to push us into involuntary bankruptcy. I had invested my lifesavings in the company, well over $4.0M, and now risked going broke.
Again my attorney pushed me to hire an advisor and strongly recommended Victory Partners, LLC. Within six weeks of engaging them, we had attracted six different parties that submitted letters of intent to either acquire the company outright or make a significant investment. We decided to negotiate exclusively with a private equity fund that held a competitor company in its portfolio. After 60 days, the negotiations were stalled and I had 30 days to close a transaction or risk losing the company in a bankruptcy proceeding. Victory successfully unwound the previous transaction and closed with a different strategic acquirer, paying off the bank in full, negotiating settlements with my trade creditors, and allowing me to get my investment back out of the company at close with a significant premium and the opportunity to earn additional proceeds through future earnings and a retained investment in the company. They exceeded everyone's expectations (the bank's, my attorney's, my shareholders', even my wife's). I now have the peace of mind of knowing that I can actually retire, take care of my family and put the pain of the past behind me. "I would highly recommend these guys to anyone.“
Visit: www.naturesformula.net
Surgical Notes
Surgical Notes is a nationwide provider of medical transcription and coding services catering primarily to the Ambulatory Surgery Center and Surgical Hospital market. Recently, Surgical Notes developed new business application software designed to increase efficiencies and reduce costs in the administrative process flow at these facilities. Surgical Notes engaged Victory Partners to assess their overall business model, discuss market positioning of a new software application including the need for potentially raising growth capital, and to supply C-Level knowledge and expertise to the organization.
Victory Partners worked quickly to identify areas for business improvement including adding new corporate governance policies, re-engineering the accounting department’s policies and procedures (including the hiring of a new Controller), analyzed business Insurance requirements, implemented CRM module for sales and marketing department, developed cash management module, and made recommendations for new IT policies and procedures including new testing protocols for software development. Surgical Notes and Victory Partners are currently working on other projects including a growth capital needs assessment.
Visit:
www.surgicalnotes.com www.vmrexpress.com www.mydoctorsnotes.com
Instinct Marketing, LLC; Romance Pros, LLC & Related Companies
The Victory Partners team was originally engaged to advise and assist management with the legal, financial, operational, and strategic issues involved with a buy-out of a hostile minority shareholder. In the professional spirit of assisting Instinct in defending against the oppressed shareholder action and the allegations of mismanagement of Instinct assets made by the hostile shareholder, our firm agreed to a further engagement. We continued to assist Instinct with the development of the sound business practices, infrastructure, policies and procedures required to defend against the allegations in the lawsuit, and to effectively, and profitably operate Instinct in a manner that would preserve Instinct’s assets, protect and increase shareholder value, and create a continued path to profitability.
Through this effort, the Victory Partners strategic consulting team inserted one of our professionals to assume the role of interim chief operating officer and was able to quickly uncover opportunities to substantially improve financial performance (through improved lead purchasing and tracking, cost reduction, budgeting, and better allocation of resources), improve operational processes (development of barriers to entry through proprietary generation of leads, implementation of human resources policies and procedures, assessment of current operating locations, assessment of technology strength, and control over essential technology), and lessen litigation risk. We dissected the business from every angle and evaluated each business segment. By segmenting the business into three key components, we were able to quickly demonstrate to shareholders that certain business units were not only non-core, they could not stand on their own and would take considerable resources away from the company’s core business. We determined that management should ultimately divest its retail operations, enter into key strategic alliances for developing proprietary content, and focus on building internet-based infrastructure to apply better viral marketing techniques and more value-added services to its customers. The company has both realized a 22% resurgence in sales and has improved its gross margin by 30%. Today, Instinct is one of the leading on-line dating companies in the United States.
Visit: www.instinctmarketing.com
Wagner Holdings, LLC & Related Companies
Victory Partners was engaged by Wagner Brown, LLC to assist this Texas-based Family Office in restructuring and recovering certain investments made by one of its members with a third party. Initially, our team determined that the major investment, a $8.0M commitment to import granite from Brazil and distribute throughout the U.S. through another related entity was both fraudulent and represented poor economics to the member. Additionally, this third-party had invested in a home building enterprise utilizing financing from the Family office that would prove disastrous.
Victory Partners partnered with a Dallas-based law firm we recommended to Wagner-Brown and immediately filed a law suit against the member’s partner for fraud and mis-representation and placed the granite importer on notice that their contracts were invalid and would not be honored without renegotiation. We then met with the member’s partner to force him to compel a refund of the substantial deposit he made with the third-party importer. Next we contacted JPMorganChase and arranged for an S/T liquidity line of credit to fund operations while we renegotiated and reconstituted the partnership from the member’s position as a minority limited partner to a majority managing member of a newly-formed LLC.
Once the business units were reconstituted, we focused our efforts on organically building a granite wholesaler and retailer with a unique strategy to target a highly under-served segment of the marketplace. A new CEO was recruited from industry and we leveraged the Family office’s accounting structure to track costs and profitability in accordance with sound managerial accounting practices. We also developed the company’s sales infrastructure and assisted in recruiting top sales personnel and creating incentive-based compensation plans.
Then we set-out to divest the member’s interest in the remodeling business and negotiated a complex exit to an unproven franchise, going as far as to garner a refund of the sizeable up-front franchise fee. Finally, we refocused the member’s remodeling business on the acquisition of new rental homes in proven, stable markets that fulfilled the same niche while drastically eliminating market downside. In a nutshell, our team turned an $8 million, high risk financial commitment into a $500,000 actual investment in a viable, burgeoning enterprise.
Today, Hard Rock Imports and its affiliated companies are leaders in the DFW Metroplex in their respective business lines.
