A national commercial cleaning business had represented that the business was on pace to generate $8 million of EBITDA. However, the business was constantly having unexplained liquidity challenges.
Novo Advisors was engaged and within approximately three weeks, our team discovered the business owners were misrepresenting performance and misappropriating funds to pay off past-due debts for businesses they previously owned (such as $5.5 million in unpaid payroll taxes). Further analyses revealed the company was on pace to burn $10 million of EBITDA annually.
Upon this discovery, the Board acted very quickly to terminate management. Novo was engaged as the CEO, COO and CFO in October 2016. We moved quickly to stabilize the company and turn the business around.
Key actions taken included:
- Evaluated the entire workforce of the company, terminating those people who were involved in the fraud, and re-establishing direct lines of report to the Novo team.
- Consolidated regional offices and rationalized other SG&A expenses.
- Reorganized the operations model by concentrating the company’s national regions into territories and building a team of key account managers (CRM) to work across all regions.
- Built out an entirely new FP&A and strategic account department responsible for estimating new projects, budget vs. actual performance, and development of operational KPIs.
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