A customer to our Client had been hit with a $25 million judgment, for which our Client had indemnified its customer. The Client, a manufacturer of consumer products, was facing both a significant financial cost and potential loss of one of its largest customers unless this dispute could get resolved quickly.
The Problem The customer demanded that our Client put up a LC for the full $25 million prior to all appeals being completed. In addition, the customer stopped paying its outstanding invoices and stopped buying new products. The Client and customer began to square-off against each other.
The Client did not have the capital to provide the LC immediately and it felt that it was legally not necessary. The client and customer had stopped talking with each other.
KGI's involvement changed the game. As representative of the Client to negotiate an agreement with the Customer, we opened up a direct dialogue and business negotiations with the customer's CEO. We shifted the conversations from rights and wrongs to practical business analyses and business solutions. More importantly, we reached an agreement that not only resolved the conflicts but provided a framework for the customer to increase sales with our Client.
Our Client did not provide a LC or any other further concessions on the indemnifications.
We agreed to a financial resolution that provides a percentage of future sales that will be placed into a collateral pool. This pool provides the customer more downside protection, helping ensure the profitable flow of business between the companies.
In all, the results included:
Litigation between parties stopped
Avoided $100-$250k of additional legal costs
Saved about $2.0 million in gross profit from goods that were shipped to customer on time
Sales have begun to increase as the relationship between the two companies has returned to normal
Whether a Company is struggling financially or on the cusp of breakthrough growth, KGI can help. Our seasoned experts work alongside management to solve complex cash flow issues, operational challenges and other business crises. If liquidity or sale is needed, KGI provides a powerful combination of services and expertise to achieve outcomes that cannot be duplicated by other standalone consulting firms.