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Sell the Company and Miss Out on a 

Potential 400% Increase in Value?

A Preemptive Turnaround by CXO Advisory Group

THE COMPANY

In its 8 years of existence the Company evolved from a vision in the minds of its 2 founders, to an extremely profitable manufacturer of Data Collection products. The company's dedication to product superiority and customer support had brought sole source positions at major end users including Wal-Mart and Disney, along with a network of value added resellers (VARs) led by Hewlett Packard.

However, things were rapidly unraveling. Revenues and profitability were declining, relationships with key accounts became strained, and the formerly collegial work environment that was a key element of the company's success, had become a war zone due to ongoing disagreements between the founders.

The Chairman and major shareholder, an absentee owner, knew that if these problems were resolved the company could grow a minimum of fourfold and dramatically increase in value. However, he felt that many of the problems were insurmountable.

THE CRISIS

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Risk - As noted above the business had begun a downhill spiral that was severely impacting on its financial performance, customer relations and prospects for the future.

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Management - The Company was being run by its 2 founders, who through hard work and dedication to their vision had become successful and wealthy. As typical of many successful partnerships, they had "outgrown" one another and due to their personal disagreements were unintentionally destroying the business 

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Manufacturing - The Company previously had a stellar reputation for product quality, durability and on-time deliveries. But the problems between the founders had impacted their subordinates, who took it upon themselves to support their leaders. In manufacturing, this meant frequent late deliveries; shipping incomplete orders and delivering products that had not been thoroughly tested. 

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R&D - In R&D, the Company's problems were evidenced by serious failures to meet customer required due dates for modifications, knowingly sending out products that did not function as needed, and an absence of new product development activity. 

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Sales & Marketing - A professional, formerly very effective sales organization had virtually stopped making calls. Even though this was impacting on their income, they felt that it was a better alternative than actively representing a company that was failing to support them and their customers.

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New Leadership - CXO Advisory Group was hired, with a charter to: 1) Resolve the problems and lead the business to achieving its full potential, or 2) Position the business for sale if the ongoing dispute could not be resolved. 

THE RESULTS

First and most critical, the principals of CXO created a new vision of aggressive growth for the business, built around its lost values of: customer support, product quality and innovation, and a collegial work environment. After some significant arm-twisting, the founders and subsequently, their subordinates agreed adopt this vision. In short order, the problems noted above were corrected, and the revitalization was underway. 

Within 11 months, the following successes were achieved:

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Grew revenue by 50%, EBITDA and shareholder value by 90%.

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Won $50MM in contracts from 3 new customers.

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COGS was reduced by 7% through outsourced manufacturing.

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Expanded share in the company's primary market by 15%.

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