2014

Managing Turnarounds for Recovery: Phases and Actions

There is a good chance that you have a troubled company in your portfolio — or will in the future. When a company is in trouble, time is the enemy. Loss is imminent without intervention. Invested capital, lender funding and stakeholder interests are all at risk. Implement a process to manage the turnaround and recover […]



John M. Collard
Chairman
Strategic Management Partners

There is a good chance that you have a troubled company in your portfolio — or will in the future. When a company is in trouble, time is the enemy. Loss is imminent without intervention. Invested capital, lender funding and stakeholder interests are all at risk. Implement a process to manage the turnaround and recover value before it is too late.

There is plenty of trouble in today’s economy. We experienced one of the worst downturns in recorded history, and the recovery is painfully slow. Turnaround opportunities abound for those who have the knowledge and fortitude to go through the process. The rewards can be plentiful, and the failures catastrophic. But turning around a troubled entity is complex — and made more difficult by the multiple constituencies involved, all of whom have different agendas, often in conflict. Let’s address the turnaround process as if all constituents are in favor of proceeding through to the end, when a rebuilt entity emerges.

According to an Association of Insolvency and Restructuring Advisors study, 91% of business failures are related to influences that management could control and 52% are internally generated problems that management didn’t control. Outside help is often required. Turnaround specialists can be an excellent choice because they bring a new set of eyes, trained in managing the process and/or advising in troubled situations.

There are five stages, or phases, in the turnaround process. It is important to look at each individual phase to understand what should transpire within each function of the company. Each phase requires different actions and the timing is important to coordinate what is happening between functions. Phases can overlap, and some tasks may impact more than one stage.

The odds of a successful turnaround are increased dramatically if a turnaround process phases and actions plan is implemented and followed. To view complete text of this article, with insights from insider John M. Collard, click here.