When costs spiral out of control

A global energy company created through a merger was floundering. The merger hadn’t gone smoothly, and the combined entity was struggling to capture the cost, revenue, and asset-footprint synergies that the deal teams had promised. Plus, the global economy was facing a sharp downturn. Despite being in a highly commoditized business, the company had done little to manage cost. And culture clashes—especially across the company’s diverse business lines and geographic regions—were making matters worse.

Soon after the acquisition, the company filed for Chapter 11 protection, and it retained AlixPartners as debtor’s advisor.

Cost controls and cultural changes correct the company’s course

As an initial step, AlixPartners assigned two of our team members to serve in the roles of chief restructuring officer and controller. We also conducted our proprietary QuickStrike^® diagnostic, which revealed opportunities for enhancing the company’s profit margin and reducing its working capital. The assessment led to a set of improvement initiatives that we implemented. The projects ranged from reducing chemical plant and refinery costs and consolidating engineering to renegotiating supplier contracts and finding less-expensive ways of storing and transporting products. The cost-saving opportunities covered a wide range of external goods and services such as logistics, technical materials, utilities, and IT.

We also helped the company transform its culture so that control of costs would be top of mind for managers. Along with the company’s new CEO, we met with each business manager to define priorities and develop specific action plans. And a new cash-flow forecasting system that we devised and implemented further sharpened the focus on costs.

When it really matters

Our fast actions helped steer this struggling company out of the storm and into safe harbor. To see itself through its emergence from Chapter 11, the company became able to secure billions of dollars in debtor-in-possession financing with lenders. And annual, operating, and overhead cash fixed costs shrank by more than $1 billion.