Situation Overview

Landauer Metropolitan was a provider of durable home medical equipment, serving more than 240,000 patients in the northeast. In an increasingly competitive market environment, Landauer Metropolitan failed to secure new Medicare contracts, resulting in the loss of customers, rapidly declining revenues, and an inability to meet debt obligations. Efforts by the owners to turn around the business proved unsuccessful, and they put the business up for sale. However, the sale process was unproductive since the lack of Medicare contracts was a barrier to interest even among strategic buyers.

With our deep knowledge of the unique challenges facing health care service providers, Carl Marks Advisors was engaged as financial advisor and chief restructuring officer to find a long-term solution to Landauer Metropolitan’s liquidity and capital challenges.

Unique Challenges

Carl Marks Advisors’ evaluation of the situation revealed that Landauer Metropolitan was lacking credibility with its lenders and facing a significant reduction in financial support. The Carl Marks Advisors team quickly addressed day to day financial operations, providing critical interim management support, and successfully managing cash collateral for six months, avoiding the need for a debtor-in-possession loan. The team also helped gain lender support for a restructuring by way of a bankruptcy filing and a 363 sale, and negotiated with a stalking horse bidder. 

Several issues made the Landauer Metropolitan engagement particularly challenging. During the initial bidding process, Landauer Metropolitan lost their license to provide equipment to Medicare patients, severely restricting their customer base. Landauer Metropolitan’s private equity sponsor pursued a sale to a competitor equipment provider, but fearing employees would leave if knowledge spread of the possible sale, the firm did not share this information with senior management. This lack of transparency and communication ultimately led to the loss of Landauer Metropolitan’s entire senior management team, making negotiations with potential bidders even more difficult.

Results

Despite the lenders’ initial inclination to force a liquidation, Carl Marks Advisors successfully conveyed the value that could be preserved through a restructuring process and assured the banks that this strategy would produce a better outcome over time. We led Landauer Metropolitan through a Chapter 11 filing and a 363 sale with the lenders’ support. In a market where operations of scale were necessary to be profitable, we identified QMES LLC, an affiliate of Quadrant, as a strategic buyer who saw an opportunity to merge several medical equipment providers. Carl Marks Advisors’ skillful execution and clear and concise communication of strategy to stakeholders was a key contributing factor to this successful outcome, which also preserved nearly 700 jobs.

Key Takeaways

  • Understanding the nuances of the healthcare landscape is crucial to successfully repositioning companies as the industry continues its rapid evolution. Adaptation and making swift changes is essential to preserving value.
  • Appropriate and timely communications to all stakeholders is critical when leading a company through a period of change. Keeping the process running smoothly during a restructuring depends on the support of the management team and employees.
  • After considering all viable alternatives to liquidation, a successful relationship and track record with lenders is necessary to establish credibility and get a consensus on the best way to move forward.