No Growth to Doubling Revenue in 2 Years – Case Study

In October 2012, we began to advise a $12 million company that hadn’t grown in 5 years. It was a good company, producing about 15% EBITDA margins and well over $1 million annually in free cash flow. We had known the CEO for several years and knew he was about three years away from wanting to sell his business and retire. “How about if we double or triple your business before we sell it?”, I asked. He thought I was on some illegal substance – but not so. After talking further, we were retained to help him create a growth plan, to determine what capital was needed and to find the capital. Result? October 2014, LTM revenue is in excess of $23 million. By doubling revenues, margins have improved slightly, and the equity value of his business (he owns 100%) has more than tripled. CEOs – good CEOs – often get into the weeds of a business that the big picture is lost. This CEO didn’t think it was possible to grow his business – he was a “one armed paper hanger”. Sometimes growth just needs vision – and the right set of contacts. I’ve spent the last 23 years …

Villwock Advisory Services joins Axial

Villwock Advisory Services LLC announced that it has joined Axial as member in order to introduce our services to a broad base of lower middle market companies, and to the private equity and debt funds that provide capital to these companies. Axial is a network of over 16,000 companies, including investment banks, private equity, lenders and operating companies.  The platform has become “the place” for each of its constituencies to network with potential clients.  Companies use the site to find advisors, whether that be to raise capital, provide advisory services or investment banking services.  Bankers and advisors use Axial to market or test market transactions, and to attract new clients. Villwock Advisory Services works with middle market companies, private equity and debt funds in several ways: 1.  We partner with operating company CEOs to develop and implement a growth and exit plans.  As an example, we start working with a company in late 2012 that had plateaued at $12 million in sales for five consecutive years.  Less than two years later, the company is on track to produce over $24 million in revenue and EBITDA margins have improved.  The CEO’s equity value has tripled, and we are looking at strategic …

CMS goes after Oxygen

After quite a long time of silence, CMS weighed in with a massive 30% cut in oxygen reimbursement in 9 competitive bid markets. CMS has been trying for a couple of years to have providers compete for business based on price. After a court setback, CMS is back. The plan expands to cover 91 more MSAs in 2013 and the rest of the country in 2016. The cut was far worse than expected and again shows that oxygen services are over priced. The largest public company in oxygen, Lincare has argued, and probably correctly, that a big cut like this will allow it to gain significant market share. No argument there. Yet earnings are going to be under pressure and after a double in the stock it is quite vulnerable. Time to be very cautious in the markets. The world’s debt problems are being recognized and the result will be a no growth world economy. The expectations of a 3%+ recovery will be an illusion. World governments are cutting spending and China has a real problem in a real estate bubble that dwarfs the U.S. bubble. Time will tell, but it could get really nasty and July is historically a …

Healthcare Reform Signed – Watch Out Below

The deed is done.  Obama’s version of healthcare reform is law and the details continue to trickle out.  My favorite so far is that consumers will be fined $695 to not get insurance — the IRS will keep tabs, but the IRS hasn’t been given any money to enforce the bill (estimated at >$10b annually) — and the IRS has been given no enforcement ability.  People who don’t get insurance will be billed $695, but if they don’t pay, then the IRS can’t take the offender to court, doesn’t charge interest or penalties — in essence,  the IRS has no power to collect.  While stupidity like this kept the cost of the bill down for the CBO, ultimately money will need to be added and the deficit will grow larger.  With the deficit in mind, last week’s US government bond offering went poorly and interest rates ticked up 10-20 basis points.  Increases in interest rates has begun and the market, not the Fed, will push rates higher and ultimately the Fed will be pulled along. If someone needs to pay $150/month for insurance, it seems to me that paying $695 in a fine (assuming the fine actually needs to be …

A Major Week in the History of the U.S.

This coming week may be a major milestone in the history of the United States. The Administration will pull out ALL stops and will do ANYTHING to get their version of the healthcare bill passed. First let’s review the procedures for passage. A couple of months ago the House and Senate passed different versions of the reform bill. Given that the Senate could not pass (by 60 votes) the same bill today, the House needs to pick up the Senate bill and pass it without amendments. The House does not have the votes to pass the original Senate bill, unless they cut a side deal with the Senate. With a side deal in place, the House intends to get the votes to pass the original Senate bill and that will be signed by the President. The deal with the House is that the Senate will introduce another bill to make some budget changes to the original bill, and will move to pass this new bill with the 50 vote reconciliation process of the Senate. The purpose of this new bill is to adjust the final version of the original act, which is necessary to get the House votes necessary for …