in the Ohio, West Virginia and Pennsylvania area,
which significantly increased revenue but added to
the complexity of the business. At first, results were
promising with revenue increasing 2. 4 times between
2011 and 2014. Profitability improved in line with the
revenue, but started to slip in 2014.
In mid-2014, CECO hired AEG Partners to review
business performance, evaluate opportunities for profit
improvement and improve cash flow practices. AEG
and CECO’s senior management team quickly identified significant issues in the financial reporting related
to Pipeline’s new construction operations. Instead of
tracking to the expected EBITDA, the Pipeline business
was generating significant losses.
These losses were buried within the complexity of
construction accounting, which not only misrepresented
profitability but upended the company’s borrowing
base. Once the project reporting issues were unwound,
the team found an $8.5 million borrowing base over-advance on a $25 million facility. The company faced
imminent bankruptcy, which would likely result in liquidation and significant losses to all the stakeholders. The
result was an immediate and significant liquidity crisis
as the company headed into its seasonal slow period.
To address the problems without distracting the rest
of the organization, a turnaround leadership team
was put in place led by AEG (Phil Van Winkle, CRO;
Jonathan Morrison, interim CFO), key CECO manage-ment/ownership (Richard Hotze, CEO; Mark Hotze,
COO) and outside counsel Hoover Slovacek (Edward
Rothberg, Melissa Haselden).
Headquartered in Houston, Compressor Engi- neering (CECO) is a provider of highly engi- neered compressor parts and repairs, pipeline
construction as well as maintenance, training and technical services. CECO has been a family-owned business since 1964, when the founder recognized a strong
demand for specialized replacement compressor parts
for the oil and gas markets.
CECO operates in two complementary divisions,
Manufacturing Services and Pipeline Services.
Manufacturing Services specializes in the design,
production and repair of compressor and engine parts
to the gas transmission, midstream, petrochemical and
air compression industries. Pipeline Services provides
construction and maintenance services to the natural
gas industry with services ranging from pipeline integrity work to pipe fabrication, compliance work and
In 2012, Pipeline expanded its operation to include
the construction of new natural gas pipelines focused
Separating “Good” Business
from “Bad” Business:
AEG Partners’ Award-Winning Turnaround of
BY CRAIG DEAN AND JON MORRISON
Compressor Engineering enjoyed two years of significant revenue as it expanded into new service areas.
At the same time, the company started to experience lower profitability and tighter liquidity. Were these
issues driven by the expansion or were there other more deeply rooted problems? The company called in
AEG Partners, which discovered undetected problems that threatened the very existence of the business.
AEG implemented a plan and resulted in a turnaround honored as TMA’s Chicago/Midwest Chapter’s
2016 Turnaround of the Year.
AEG and CECO’s senior management team quickly identified significant
issues in the financial reporting related to Pipeline’s new construction
operations. Instead of tracking to the expected EBITDA, the Pipeline
business was generating significant losses. These losses were buried
within the complexity of construction accounting, which not only
misrepresented profitability but upended the company’s borrowing base.