Case Study: Global Knowledge Networks, Inc.

Global Knowledge was the largest independent training organization for IT professionals in the world.  Following a period of explosive growth, the company suffered a major reversal of fortunes commencing with the collapse of tech demand in mid-2000.  With a largely fixed cost structure, the company required quarterly infusions of cash from its equity sponsor to fund its downsizing activities.  Seeing no meaningful improvement in operating performance or projected sponsor funding requirements, we were hired by the Board to assess the cost structure of the US operations and recommend a course of action to minimize further funding requirements of the sponsor.

We evaluated the variable and fixed costs of training delivery, the effectiveness of sales and marketing methods and channels, the performance of call centers, the Company’s competitive positioning with its key partners (Cisco, Nortel and Microsoft) and the potential for new strategic alliances.  Although our charge was to focus on US operations only, we uncovered significant control weaknesses in certain foreign operations of the company.  Following completion of our assessment, we were retained to assist management in the implementation of our recommendations.  Subsequently, we assumed the CEO and CFO roles on an interim basis to address certain strategic and global operations issues.

Numerous actions were taken to reverse the negative trends of the business.  Within 90 days of our joining the management team, we eliminated a seven-year reliance on quarterly funding by the sponsor.  Sponsor-guaranteed bank debt was permanently reduced by $11 million, and sponsor guaranteed seller notes of $13 million were retired.  EBITDA recovered from a negative $14 million in the year of our arrival as advisors (we arrived in Q4) to a positive $9 million the following year when we assumed interim management roles.  By Q4 of that year, a new CEO was successfully recruited.  When our project ended in Q1 of the subsequent year, the company’s EBITDA for the year was projected to be $17.5 million.