Stuart W. Looney, CPA

Turnaround Mgt

 

Turnaround Management  - One of the more difficult aspects of creating a viable workout plan for an organization in financial distress is objectivity. It is often difficult for "insiders" to step back, weigh the facts, analyze the situation against strategic and economic criteria,  and to then recommend a course of action that maximizes the long term interests of  the shareholders.  Mr. Looney can offer you the insight and support of an objective "outsider" with the professional experience of having worked with a number of distressed companies, including those having elected  court supervised reorganization as well as those  that found non-supervised voluntary workouts more practical for their particular situation.

Turnaround managers are not usually smarter than current management, nor are they usually more knowledgeable. What they have, that current management needs but can't have, is a fresh view and complete objectivity void of any political agenda. At the moment that a company has reached "turnaround" criteria, the "objectivity" must  be in the context of maximizing economic value for the benefit of the equity holders. In addition, a turnaround manager facilitates a fresh face and positive agenda helping to calm concerned creditors, to instill confidence in guarded customers, and to work closely with employee groups to quiet their fears and to solicit their enthusiasm for getting the company back on track.

The first step in any turnaround is communicating the dedication of the company to getting itself back on track and to establishing confidence and rapport with the stakeholders. Promising, and then delivering, a continual flow of relevant dialog is so very important throughout the process.

The next step is gathering from all concerned a knowledge base of relevant facts.  What is the company's inventory of both human and economic capital, where is the company today financially, and, on a pro-forma basis, where is the company likely to be over the next six to twelve months if no action is taken? How healthy is the "core business" after the bleeding has slowed or stopped ((viability analysis - are the long term prospects for the company sufficient to justify the time, expense, and risk components to justify a dedicated turnaround?) 

Once confidence can be ascribed to the gathered facts and agreement reached that these facts are as reasonably accurate as the situation will allow, a plan of action can be agreed. Often these plans need to be two pronged, one for immediate action to lessen the bleeding and put the company into the "critical care" unit with strict cash management routines, allowing for survival as the longer term plan is developed.

Each situation is different, as are each set of equity holders and their respective risk tolerance and materiality criteria. From the given facts of the situation and the profile of the equity holders, a plan must emerge that considers a matrix of options including, but not limited to a classic non-court supervised sweat based turnaround, company sale, a strategic / financial merger, equity infusion, liquidation, refinancing debt and terming trade obligations, voluntary surrender, unopposed foreclosure, or court supervised bankruptcy.     

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