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Construction & Real Estate

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MERU CASE STUDY

Assisted with the winddown of $400M in surety bond exposure and a successful sale while improving EBITDA and cash position by $30.5M

COMPANY OVERVIEW

  • Road construction, paving and materials company, serving state and local governments, with ~$150M of revenue and ~100 active jobs with associated $400M surety bond liability
  • The Company was failing to collect on its $39.8M in costs in excess of billings and $23.7M in past due A/R on the balance sheet on a timely basis and was experiencing a high cash burn of ~$3M per week
  • Deteriorating financial performance exacerbated by the COVID-19 pandemic and ineffective leadership had led to a failed sale process and the resignation of the CFO
  • MERU was retained to (a) assess cash runway and preserve liquidity, (b) identify and implement plan to improve collections of past due A/R and underbillings, (c) identify cost cutting measures and (d) support a renewed sale process

OUR APPROACH

  • MERU served as VP of Transformation and oversaw the appointment of a new CEO and a VP of Finance
  • Built a 13-week cash forecast to provide visibility into liquidity and determine funding needs from the parent company, managed weekly liquidity reporting and variance tracking
  • Developed authority matrix for cash control and bid approvals
  • Developed a detailed tracking process for the top 20 “problem projects” that were tying up working capital, including 55% of A/R and 96% of costs in excess of billings

  • Developed an incentive plan for retention of key employees through the sale process

  • Analyzed SG&A and identified ~$2M of savings opportunities

  • Assessed strategic alternatives and developed a liquidation and recovery analysis

OUR IMPACT

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Developed communication plan for new management that ensured a smooth transition and stability.

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Collected $30.5M of costs in excess of billings and past due A/R by establishing processes, prioritization, and accountability metrics.

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Facilitated the winddown of over 100 projects with approximately $400M in surety bond exposure, which enabled the parent company to execute a successful sale free of guaranty obligations.

Quote

“One of the most critical decisions that we made was to hire you and your team (MERU). We can not thank you enough.”
- Parent Company, CIO