KGI Helps Save Media Company
The media & entertainment industry is confronting multiple challenges – in addition to the broad economic downturn there is the fundamental change to industry economics with evolving windows and a redesign of the paid advertising model.
KGI has performed some significant work in the media and entertainment industry. Recently, we had the opportunity to work with a notable competitor in this space, delivering significant results in a tight timeframe, including:
- Rightsizing headcount by 50%
- Reducing the projected burn rate by more than 40%
- Restructuring with creditors and reducing the number of delinquencies by 28%
- Initiating the process to closing a major money-losing division
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The client is an Emmy Award-winning leader in the production and distribution of family-friendly television and film content, developing a library of several hundred hours of content. Recently, a controlling share of the Company had been purchased by a prominent private equity firm.
Despite its stellar market pedigree, our client had a history of subpar financial performance, weak management controls and inconsistent decision-making.
Preceding KGI's engagement, the Company was suffering from a severe cash shortage -- cash balances fell over 75%, from $900,000 to $200,000 in less than 90 days -- and management could not determine how much time it had before the company ran out of cash.
Up-to-date financial information was unavailable, leading to indecision by management on major issues and poor employee morale.
Created a comprehensive daily cash flow management model. This tool tracked cash-in and cash-out on a daily and weekly basis benchmarked against the board-approved plan. The model was highly automated, new customers and vendors (over 700 in total) and changing payment terms automatically providing real-time information on current and forecasted cash position.
Presented detailed weekly financial status reports. The report identified actual, missed, and deferred payments by customers along with weekly expenses. This report became an invaluable tool for cash management because it included a comprehensive list of pending customer payments tha management could pursue and contact to ensure timely cash payment.
Facilitated daily cash management meetings. Reviewed the day's cash inflows, using the information to designate which obligations should be paid or restructured on a daily basis.
Advised senior management on restructuring negotiations. Reviewed outstanding balances and relationships with over 130 creditors, provided strategic and tactical advice to management. The Company is completing the process of restructuring trade debt accounting for over 60% of total obligations.
Developed a comprehensive cash flow based analysis of company's troubled DVD division. This assessment quantified and disaggregated all cash flows on a weekly basis since inception, providing crucial insight into the viability of staying vs. exiting the business. This comprehensive analysis of the division had never been performed and refuted many crucial assumptions made about the division's performance.
While it is too early to offer a final assessment of the client's future success, it is clear that KGI has positively impacted Company strategy and operations, including:
- A major restructuring of operations, rightsizing headcount by 50% and reducing its projected monthly cash burn by at least 40%
- Initiating the shutdown of the cash draining DVD operation
- Restructuring the finance organization: staffing changes to better match needs with skills, and institution of new processes and procedures to improve information timeliness and accuracy
- Initiating the process to restructure trade debt with dozens of creditors, a crucial step in the turnaround process. The number of creditors with outstanding obligations has already been reduced from 130 to 93
Whether a Company is struggling financially or on the cusp of breakthrough growth, KGI can help. Our seasoned experts work alongside management to solve complex cash flow issues, operational challenges and other business crises. If liquidity or sale is needed, KGI provides a powerful combination of services and expertise to achieve outcomes that cannot be duplicated by other standalone consulting firms.