CASE STUDY

Aerospace and Defense Contractor

CASE STUDY

Aerospace and Defense Contractor

Novo Advisors’ detailed analysis and focused action protects creditors — and jobs

Situation

An aerospace and defense contractor that machines and forms high-precision parts for commercial and military aircraft OEMs had struggled since 2017 with senior management turnover, CapEx spend and increases in specialty metals prices and skilled labor costs. The company operated at a $7 million loss in EBITDA in 2022 and was only able to survive 2022 due to $4 million in PPP funding in 2021, and by increasing its trade payables by a factor of two.

Additionally, prior to engaging with Novo, the company attempted some price improvements with customers but were unsuccessful. Despite its poor financial performance, the company produced excellent products that were critical to some of the biggest aircraft programs in the world.

The Novo Approach

Novo was engaged and appointed CRO in 2022 and immediately put profit improvement and spending discipline at the forefront of the turnaround plan.

Results

Within the first 30 days, Novo presented and successfully negotiated $4.5 million of annual price increases with the company’s two largest customers. These price increases became effective January 1, 2023.
Novo also implemented strict cost controls, requiring approval for all purchases over $500 and approval for all overtime. While this was a major culture shock to the organization, we immediately identified and cut out approximately $200,000 of monthly credit card spending and unnecessary operating expenses.
Overtime levels were cut by 50 percent through disciplined scheduling and accountability from plant management.
As a result of the lenders, trade creditors, and equity being fatigued from years of prolonged underperformance, it was determined that a sale was the best course for the company. Under the newly improved 2023 projections, Novo was able to secure five credible LOIs and the business sold in February 2023.
The sale preserved over 250 jobs, kept production online for our country’s largest aircraft producers and preserved 100 percent of the secured lender’s outstanding debt.

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