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MCA Financial Operates and Sells Three Divisions of an Arizona Company, Producing Significant Recoveries

By August 22, 2023Insights

As a court-appointed Receiver, MCA Financial used its expertise in restructuring to operate and sell three divisions of an Arizona company, leading to significant recoveries for the secured creditors.

The business, generating revenues of $60 million and consisting of three operating divisions, engaged in contract manufacturing of nutritional supplements, production of value-oriented household goods for dollar and discount stores, and selling branded and private label pet supplements and related products. The company encountered constricted working capital and rising interest rates, impeding operations and inventory procurement for order fulfillment. Rising labor costs, rent expenses, and additional complexities from heightened international freight costs and supply chain disruptions further exacerbated the situation.

Taking the reins of all three divisions, MCA Financial implemented robust cash controls and management systems. Our close collaboration with divisional managers facilitated the development of a comprehensive 13-week operating cash flow budget, garnering lender endorsement and fostering a mechanism for weekly reporting.

MCA negotiated and executed Letters of Intent with a single buyer for the manufacturing and pet divisions, resulting in expedited closings with court approval and a seamless transition of business operations to the new owner. This approach was also applied to the sale of the dollar division assets, complemented by an ongoing process of liquidating the remaining company assets. This process included selling the remaining inventory and equipment and collecting $11 million in accounts receivable.

The orchestration of the sale process for the three divisions required unwavering focus to maintain operational integrity and going concern value. Managing priorities ensured the effective closure of each sale, despite challenges such as the departure of key personnel and potential client attrition. These hurdles demanded candid dialogue with customers and employees, coupled with strategies to sustain order fulfillment, all of which helped to cushion the repercussions of key personnel transitions.

Our team’s financial analysis and modeling capabilities were decisive in crafting meticulous budgets and efficient cash management plans. MCA’s extensive experience provided the leadership for successfully guiding the sale processes, shepherding due diligence, and adeptly negotiating agreements.   MCA’s depth of experience was instrumental in achieving the successful outcome of this complex engagement.