Industrial group restructuring: from -€4M to EBITDA-positive in 14 months

The Challenge

A Spanish industrial group specialising in the manufacture of components for the automotive and construction sectors operated through four subsidiaries with consolidated turnover of 45 million euros and a workforce of 280 people spread across two production plants in Catalonia and one in Andalusia.

Falling margins driven by rising raw material costs, the loss of two framework contracts with European OEMs, and an investment in a new production line that did not reach the planned volumes had led the group to accumulate 4 million euros in losses over two years. Net financial debt stood at 15 million euros, with a net debt/EBITDA ratio that had breached the bank covenant threshold.

The bank pool, comprising three lenders, had communicated its intention not to renew the 3-million-euro revolving credit line expiring in eight weeks. Without this facility, the group would be unable to meet supplier payments the following month. The owning family, now in the second generation, had never faced a situation of this severity.

Our Approach

We structured the intervention across three simultaneous phases, fully aware that the window to avoid a liquidity crisis was less than two months.

In the first phase, we conducted an accelerated financial and operational diagnostic of all four subsidiaries. We identified that one of them — focused on turnkey installations — had been operating with negative margins for three consecutive years and was consuming resources from the profitable subsidiaries through undocumented intercompany loans. The other three subsidiaries were individually viable if the shared overhead costs with the loss-making entity were eliminated.

The second phase involved preparing a five-year viability plan with two scenarios: a conservative one envisaging the orderly liquidation of the loss-making subsidiary, and an optimistic one including its sale to a competitor that had expressed interest. The plan incorporated a map of cost-reduction measures totalling €2.8 million annually, including the consolidation of the two Catalan plants into one, the renegotiation of supply contracts, and the optimisation of working capital.

In the third phase, we prepared and presented the plan to the bank pool. The negotiation was complex: the three lenders had different positions, and one had already initiated an internal credit provisioning process. The key was presenting a plan with conservative, quarterly-verifiable assumptions and offering additional personal guarantees from the family’s own assets against the new working capital facility.

Results

The bank pool approved the viability plan within ten weeks of mandate start, avoiding the liquidity crisis by a margin of eleven days. The refinancing covered 12 million euros of long-term debt with a three-year maturity extension and an 18-month principal grace period.

The installations subsidiary was sold to a Catalan competitor for 3.5 million euros, a price above the liquidation value we had initially estimated. The 220 employees of the three viable subsidiaries kept their jobs, and the collective dismissal at the sold subsidiary was negotiated by the buyer at terms above the statutory minimum.

By month 14 of the plan, the group reached positive EBITDA for the first time in three years. By the close of the second year, turnover had stabilised at 38 million euros with an EBITDA margin of 8%, within the range projected in the conservative scenario of the viability plan.