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Case Study:
Medtech Manufacturer Has Award-Winning Turnaround

Overview of Project
For our work with Medical Graphics Corporation, Manchester Companies, Inc. was awarded the national Turnaround Management Association’s “Turnaround of the Year Award” in 1999.

Medical Graphics was a publicly held $20 million company that designs and produces non-invasive diagnostic systems for the prevention, early detection, and cost-effective treatment of heart and lung disease. Its products include patented hardware and software sold under the MedGraphics trade name.

The company had aggressively expanded its sales, marketing, and research and development efforts to implement a new strategy in 1996, but lacked necessary capital. As a result, it was in a severe financial crisis in the first quarter of 1997 and engaged Manchester Companies to provide crisis management, restructure the company, and turn it around. Manchester's professionals restructured the company by obtaining a new line of credit and $1.5 million in equity financing, restructuring its trade debt, and reducing its workforce by 25%. The turnaround plan included strengthening the company’s leadership and extricating the company from its operational issues and re-focusing its selling efforts to its core markets and products. After the turnaround was underway, Manchester identified a financial buyer and negotiated the sale of the company to Angeion Corporation, a public company with significant cash reserves but without products. Medical Graphics became a wholly owned subsidiary of Angeion and recovered from its crisis by the end of 1998.

The Challenge
Medical Graphics was a profitable $23 million-revenue company in 1994 that implemented a diversification strategy in 1996 that was poorly executed, resulting in a $9 million loss on $20 million of revenues. Employees, including top sales people, were leaving the company; vendors were no longer sourcing the company; its lender had “called” its loan; and its stock price had plummeted from a high of $5 to $.062. It was in the midst of a severe financial crisis.

The Engagement
Manchester Companies was engaged by the board of directors in January 1997 to provide crisis and interim management, restructure the company, and get it it refocused on achieving profitability and providing shareholder value.

The Solution
Our professionals immediately stabilized the company by implementing $7 million in expense reductions, replacing key board and management positions and acting as interim managers, and arranging for a $1.5 million equity placement and a new $4.1 million line of credit. We also closed a wholly owned subsidiary office in Dusseldorf, Germany, and implemented programs to improve gross margins. The focus of the company was changed to a “back to the basics” approach on the company’s core technologies and markets. After the company was stabilized and on the path to turning around, Manchester’s professionals acted as investment bankers in the sale of the company to Angeion Corporation, a cash-flush but product-poor company.

The Impact
Medical Graphics is now operating as a wholly owned subsidiary of Angeion, which reported sales of $24 million for the year ended October 31, 2005, and recently introduced a new line of health and fitness products marketed under the New Leaf Health and Fitness Brand.

Working with Manchester

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