Case Study: Turnaround of a Metalworks Company in Distress

Names, locations, and certain details of this case have been modified to protect the confidentiality of the parties involved. The figures and results are representative of the actual transaction.

A Company on the Edge

An industrial metalworks company in northern Spain — foundry and machining of industrial components — with 58 employees, three industrial units, and revenue that had fallen from EUR 9.2 million to EUR 7.0 million over three years. EBITDA was negative: the company was losing EUR 500,000 per year, consuming reserves accumulated during decades of sound management.

The founder had passed away three years earlier. His widow and two children inherited the ownership, but none had industrial experience. They hired an external managing director who proved to be a good technician but a poor manager: he failed to read the numbers, did not take the difficult decisions the situation demanded, and by the time the family realised the true extent of the deterioration, the company had been loss-making for two years.

The financial situation was critical. Cash covered three months of operations. Two bank credit lines were at their limit. A key raw material supplier had moved the account to prepayment. And the 58 employees, many with 20 or 30 years of tenure, sensed something was wrong.

We were contacted by a family adviser who knew our experience with special situations. The question was direct: can this company be saved, or should they consider closing?

The Diagnosis: 30 Days to Understand

We conducted a fast-track diagnosis in 30 days. This was not the moment for lengthy processes — cash was running out. What we found was revealing:

A viable core business. The company had 35 industrial clients, mostly machinery and capital goods manufacturers. Product quality was recognised. No client had left due to dissatisfaction with the product — those lost had departed because of missed delivery deadlines and lack of responsiveness.

An overwhelmed cost structure. The company operated three units when it needed two. It maintained a small-parts foundry line running at 30% utilisation — a legacy of the founder that nobody had dared to question. Indirect costs represented 42% of total costs — ten points above the sector average.

Absence of management. There was no financial controller, no dashboard, no tracking of margins by product or client. The managing director was making decisions with data three months old. The commercial department had no targets. Production planning was done on paper.

A loyal but demotivated workforce. Employees knew the company was in trouble. Uncertainty had created an atmosphere of distrust and low performance. Several skilled technicians were looking for jobs at other companies.

The Recovery Plan

We designed a viability plan in three phases with a clear objective: reach breakeven in 12 months and 8% EBITDA in 24 months.

Phase 1: Stabilisation (months 1-3)

The first measures were about survival:

Capital injection. Blue Mountain acquired 70% of the company through a capital increase that contributed EUR 600,000 in immediate liquidity. The family retained 30%, without additional outlay, but diluting to allow fresh capital in. It was the only workable structure: the family had no capacity to inject capital, and the company needed cash to survive.

New leadership. We replaced the managing director with a professional with specific experience in industrial turnarounds. In his first week, he met with all 58 employees in small groups to explain the real situation and the recovery plan. The transparency was deliberate: better for the team to know the truth than to fill the vacuum with rumours.

Cash under control. We renegotiated payment terms with the three main suppliers, recovered a credit line with additional collateral, and established weekly cash monitoring. Every expense above EUR 2,000 required managing director approval.

Phase 2: Operational Restructuring (months 4-12)

With the company stabilised, we tackled the fundamental transformations:

Facility consolidation. We closed unit three and concentrated all activity in units one and two. The empty unit was leased to a neighbouring company — EUR 4,500 per month going straight to the income statement. The closure also freed maintenance and general services staff.

Closure of the loss-making line. The small-parts foundry was shut down after a contribution analysis demonstrated it was losing EUR 180,000 annually including allocated overhead costs. The decision was painful — two employees from that line were redeployed and four accepted a negotiated exit — but essential.

Production improvement. We implemented a production planning system that replaced paper. Delivery lead times were reduced from 6-8 weeks to 3-4 weeks — a change clients noticed immediately. Productivity per man-hour improved by 22% in nine months, simply through better scheduling and elimination of idle time.

Financial control. A part-time controller (shared with another company in our portfolio) implemented a monthly dashboard with margins by client, by product line, and by cost centre. For the first time in years, management knew exactly where the company was making and losing money.

Commercial review. We identified that 20% of clients generated 75% of gross margin. We focused commercial effort on retaining and developing those accounts. We raised prices by an average of 6% with clients where the company had negotiating power — none left. And we stopped pursuing small, low-margin orders that congested production.

Phase 3: Selective Growth (months 13-24)

With the house in order, the focus shifted to growth:

New market: renewable energy. The company had the capability to cast and machine components for wind towers and solar structures — an expanding market that valued domestic suppliers with quality certification. We dedicated specific commercial resources to this segment and secured contracts with two renewable component manufacturers.

Machinery investment. A state-of-the-art CNC machining centre (EUR 280,000) that doubled precision machining capacity — the highest-margin service — and enabled acceptance of orders that had previously been subcontracted.

Team training. A technical training programme for operators (welding certifications, CNC programming) and management training for middle managers. Training investment was EUR 45,000 over two years — a modest amount with an enormous return in productivity and motivation.

Results

Metric	Starting point	12 months	18 months	24 months
Revenue	EUR 7.0M	EUR 6.8M	EUR 7.5M	EUR 8.4M
EBITDA	-EUR 500K (-7.1%)	+EUR 120K (1.8%)	+EUR 480K (6.4%)	+EUR 780K (9.3%)
Headcount	58	52	52	56
Active clients	35	32	38	44
Average delivery lead time	6-8 weeks	4-5 weeks	3-4 weeks	3-4 weeks
Net financial debt	EUR 1.8M	EUR 1.5M	EUR 1.2M	EUR 0.9M

Revenue initially fell — a consequence of closing the loss-making line and pruning unprofitable clients — but profitability recovered far faster than projected. Breakeven was reached in month 10, two months ahead of target.

The figure we are most proud of: of the 58 original employees, 48 remain with the company. The four who left during the restructuring did so on negotiated and accepted terms. And the eight new employees joined a company with a future, not a company in decline.

Personal Reflections

In our experience with corporate restructurings, the biggest obstacle is never technical — it is emotional. The families who own distressed businesses feel shame, fear, and a loyalty to the founder’s legacy that prevents them from making the necessary decisions.

This case taught us three things:

Acting early is acting well. Had the family contacted us a year earlier, the restructuring would have been less painful and less costly. Every month of losses reduces the available options. If your company is in a situation of financial difficulty, do not wait until it becomes irreversible.

People are the most valuable asset — even in a turnaround. Closing lines and consolidating facilities is relatively straightforward. Keeping the team motivated through the storm is what is truly difficult — and most important.

Behind every company in crisis is a business that someone built with effort. Our responsibility as investors is not merely to fix the numbers. It is to preserve what deserves preserving and transform what needs transforming.

If your industrial business is facing operational or financial difficulties, do not consider it a failure — consider it an opportunity for reinvention. Let’s talk.