Undisclosed – privately held client
Full-service provider of software and services to local and municipal governments
Based in New Jersey, the company was a private equity backed firm with multiple rounds of financing in place. Over time, the company struggled to retain market share due to pricing constraints and cash flow struggles ensued. A principal of MainStream Management was retained to conduct a detailed analysis of the future viability of the private equity backed software firm. The private equity firm had invested tens of millions of dollars of equity capital in the company and the enterprise was struggling. The business model was generating reasonable sales but the economic model supporting software development and client support did not generate sustained profitability over the long-term. At the completion of a comprehensive analysis, the principal was asked to undertake the role of Interim Chief Executive Officer in order to stabilize operations and potentially position the enterprise to be sold in an equity transaction.
As Interim CEO, MainStream’s principal undertook a series of management initiatives focused on improving operating cash flow and repositioning the Company’s products in the marketplace. A comprehensive new marketing and sales program was developed which allowed clients to be reached in a more cost effective manner for the company. Target marketing of various segments of the local and regional governmental markets was put in place in order to focus on more profitable opportunities. In addition, the installation and service component of the enterprise was re-priced to generate more favorable economics e.g. generate profitability. This came on the heels of analysis showing that the client was losing money on the pricing of software support services. Downsizing of the senior management team occurred in order to reduce operating expenses. In addition, reallocation of responsibility to the remaining senior managers occurred in order to ensure that the full range of management responsibilities was covered. Finally, an incentive program was created for certain members of senior management to encourage those managers to assist in the restructuring of the enterprise. These initiatives came on the heels of a long-term assessment identifying the major problems of the organization.
The client’s cash flow drain was eliminated within six months and within twelve months the client was generating an EBITDA margin exceeding five percent. After 18 months, the margins increased to double digit levels. The client was marketed to a select group of strategic buyers and sold to a mid-West based provider of software at a price that exceeded the expectations of the private equity firm.