A winning rebound for a leading fitness company
How KPMG helped a fitness leader regain its financial strength
Client
A major manufacturer and marketer of fitness recovery equipment
Sector
Consumer packaged goods; athletic products and technology
Primary goal
Restore solvency; return company to growth
The client was a leader in fitness recovery equipment. Founded in 2011, the company built a financially strong business with $50 million in earnings before interest, taxes, depreciation and amortization (EBITDA) and approximately $250 million in revenue. But then COVID-19 froze its supply chains, drying up revenue and rendering previous growth estimates obsolete. When the company found itself in default, its leading lender recommended engaging KPMG as a financial adviser. KPMG helped the company improve its financial performance, obtain new debt and equity financing, repay all lenders, and return to health. The engagement exemplifies the depth of experience within—and the wide-ranging services provided by—the many resources of KPMG.
KEY OUTCOMES
Making a measurable difference
- $30 million in cost reductions
- $75 million in inventory monetization
- New equity and debt financing provides stability
- New processes and controls for moving forward
Client transformation journey
Click on each part of the journey to learn more about our client’s transformation.
This is not our first time seeing a very good start-up with a very good product hit a roadblock. They needed a more mature organizational structure. Our goal is to bring in as much experience as needed, and that’s the real strength of KPMG—we have much better depth in terms of skill sets than many companies do. Here, we were able to bring in three different elements of KPMG to help this company.
Pete Smidt
Managing Director, Deal Advisory & Strategy
How KPMG refinanced, recapitalized, and restructured a company in just five steps
KPMG took a proactive approach, working closely with the board and company management to address the client’s full range of issues. The strategy engaged multiple KPMG capabilities: wide-ranging financial and operations services, project management to coordinate the process, and advanced data and analytics. In a stepped methodology, the engagement unfolded in five distinct phases: understanding the key areas for exploration, assembling and parsing the data, planning the individual rebuilding steps, putting those plans into action, and monitoring results to assess progress toward intended goals.
1. Preliminary phase
Initial assessment
With advanced data and analytics, KPMG quickly aggregated extensive financial and operational information into a single source of truth for the client. Workshops with senior leaders and business stakeholders pinpointed trouble spots and enabled the setting of goals.
2. Diagnostic phase
Deep drilling
Armed with salient information, KPMG performed a rapid assessment to determine the most significant challenges facing the client. In only four weeks, KPMG had analyzed every facet of the client’s operations and financial controls. This included a review of the company’s credit agreements, vendor relationships, and account relationships throughout the commercial, manufacturing, operational, and administrative sides of the business. Diving deeper, KPMG evaluated the company’s performance against its stated goals over time. The analysis provided the company’s board and management with the framework to understand company performance and identify areas for improvement. This helped build stakeholder confidence in the company’s recovery opportunities.
3. Planning phase
Build the road
With a baseline level of performance established, KPMG worked with the board and management to help determine the most impactful value and cost levers and develop initiatives to realize them.
Scoping the resources and governance needed to accomplish the turnaround, it was clear that recovery would require strong synergy between three separate disciplines within KPMG Advisory: Restructuring, Working Capital, and Corporate Finance. Working together, they developed a clear plan to address the most urgent issue: providing sustainable cash flow.
4. Activation phase
Leveraging knowledge
KPMG built a 13-week cash flow model, a very tight forecast of cash in and cash out. By showing weekly variances, the model made all functions within the company accountable for performance. This provided clear internal benchmarks across business units, enabling the client to identify and quickly address issues.
While one team focused on the commercial sale side, from China to shelf, the finance team concentrated on liquidity and back-office processes. A third team benchmarked the company against others and put together an inventory monetization plan. Through the benchmarking process, KPMG was able to define both the current and desired future states. With the destination established, a path could be found.
KPMG Working Capital began monetizing inventory while Corporate Finance found new debt and equity options. Meanwhile, KPMG Corporate Restructuring built modern governance systems to help organize and transform the company’s management capabilities.
These efforts quickly led to strategic insights. In one instance, KPMG market analysis identified a gap in the company’s product line—it needed a less-expensive gun massager to compete with new imports. By ordering at the start of the year, the product was on US store shelves by September and accounted for a large percentage of holiday shopping sales, bolstering the client’s financial position.
5. Completion phase
Bringing it all together
Working with the company’s board, management team, and business leaders, KPMG helped implement value and cost levers that had a decisive impact on company performance. These efforts cut expenses by $430 million, monetized $75 million worth of inventory to raise capital, and streamlined operations. KPMG helped keep stakeholders, including creditors, up to speed and informed throughout the process. With support from KPMG, the company was able to move faster, act with greater precision, and achieve more impactful results.
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Meet the team that made the difference for a major manufacturer
Let’s talk about the ways data and analytics can transform your effectiveness.
KPMG. Make the Difference.
Pete Smidt
Managing Director, Deal Advisory and Strategy, KPMG US
James Grace
Director Advisory, Strategy - PDT, KPMG US
Pete Smidt
Managing Director, Deal Advisory and Strategy, KPMG US
James Grace
Director Advisory, Strategy - PDT, KPMG US