Ask a group of 12-year olds what they want to be when they grow up, and it’s a safe bet that none of them will say “a turnaround professional.”
Snatching success from the jaws of failure is a job that finds you, says William Snyder, a veteran in the field and co-founder of CR3 Partners, a new turnaround firm that reunites professionals Snyder has worked with over the past 20 years.
It’s no secret, we live in turbulent economic times. For weeks, the stock market soared. Then the Dow dropped to a low the market hadn’t seen since September 2016. For investors, borrowers and lenders, uncertainty creates anxiety. It may seem like an odd time to start a new business, but for turnaround professionals, all the stars are aligning. Snyder points out that even a child can see this.
“I have 14-year old twins,” says the father of six. “I pay them in silver for their work at the farm. They get the silver coins every Sunday night, and they learn the importance of volatility. They learn to track other commodities to know the value of the silver. So on election night, I’m in Chicago, and my 14-year-old son is watching the election. Trump wins Ohio, and my son texted me. He said, ‘This is awesome. Silver is shooting up. The Dow just dropped 600 points. Mexico is falling apart. You are going to make so much money.’
“So my 14-year old nailed it. Volatility is good for the turnaround business.”
CR3 is starting with a staff of 50 with offices in New York, Boston, Dallas, Charlotte, Chicago and Los Angeles. “This thing has really taken off,” he points out. “It took CRG 10 years to get to be 60 people, and it only took us about six months to get to 50.”
Sucked In By Tragedy
“Most people get into this business because something went wrong, and they are sucked in because of tragedy,” says Snyder. “That’s what happened to me.”
After college, Snyder took a job running a Coca-Cola bottling company. “I did really well,” he recalls. “And by the time I was 27, I was a millionaire.”
He used his salary from Coke to buy nine different companies, but in his exuberance, he overextended himself. “By the time I was 29, I was broke,” he says. “I ended up taking half of those businesses through bankruptcy. And that’s how I got into the [turnaround] business — just through personal tragedy — and I never got out of it.”
To capitalize on his newfound turnaround expertise, Snyder took a job with Buccno and Associates, which, he says, was the first large boutique to do turnaround. After four years with the company, he struck out on his own as in independent contractor. Then he joined seven other principals and started Crossroads Capital Partners in 1997.
In 2001, he and his partners had what he calls “a falling out.” Looking back, he recalls, “We were basically focusing on capital and turnaround. They focused more on the turnaround side, and that’s not where I thought we were going, so I left. But eventually, most of these partners ended up with me, focusing on middle-market work and capital providers. We all ended up in the same place eventually.”
Returning to His Roots
After Crossroads, he started Corporation Revitalization Partners (CRP), which merged with corporate recovery group, CRG, in 2007.
Snyder sold CRG to global giant Deloitte in 2012 and moved to the large international firm as principal of Deloitte Transactions and Business Analytics and co-leader of the Deloitte Corporate Restructuring Group. It was a productive period for Snyder who was inducted into the American College of Bankruptcy as a Fellow of the College at a ceremony at the Smithsonian Institutes in Washington, D.C. in March 2014.
But he felt a strong urge to return to his roots.
“I wanted to get back to middle-market turnaround work. That’s my passion. I got my group of partners back together,” Snyder says. They formed CR3 Partnership. Of the 19 current partners, Snyder says only one has not worked with him at one of the other starting companies.
Because the company is made up of professionals with deep experience, Snyder says they can provide interim management for floundering companies.
Start with Performance Improvement
“We place a lot of senior managers in situations where companies are underperforming. We have a whole bench of people that have 25 to 40 years of management experience, and we place them in the companies in distress. We also do performance improvement work. When you go to fix a company, you first have to fix the operations, then you do the restructuring of the balance sheet. If you try to fix the balance sheet first, you lose the credibility of everybody involved in the turnaround because you’re not maximizing value.”
“So, that’s why we have these multi-disciplines in our little group — performance improvement, inner management and turnaround. We use all of those and intertwine them. We’re a small group but we provide a lot of value.”
Snyder notes that companies never call to say they are in trouble and in danger of failing.
“We’re usually brought in by someone in the capital structure who has lost faith in the management team and tells the company they need to hire a CRO. In 30 years, I have never had a company call me and say they need help and can’t figure it out. By the time we’re forced into the situation, it’s usually late in the game.”
Do the small companies he works with wait longer to ask for help than large companies?
“No,” Snyder says. “They all wait until the last minute.” Even large companies, he adds, don’t call a turnaround professional until the bondholders or otherstakeholders require it. “Once they hire a restructuring professional, they almost always file [Chapter 11] within a month,” he says.
Keeping Companies Out of Chapter 11
“Very few lenders want their clients in bankruptcy,” he adds. “It’s an expensive and time-consuming way to reconcile something. They generally go in because it’s the only way to deal with their problems.”
Snyder says his job is keeping companies out of bankruptcy and his team is largely successful. Filing bankruptcy, he explains, has also changed a great deal during his more than 20 years in the business and the new rules make it more difficult for industries like retail to execute a restructuring after filing.
‘Everything is more complicated,” he says, but the main source of that complication is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which totally changed the bankruptcy procedures. Although BABCPA was passed to prevent abuse of Chapter 7 filings, its provisions have spilled over and made Chapter 11 proceedings more complicated, too.
As one national retail chain after another bites the dust, Snyder contends that the narrow timeframe required by BABCPA has a negative impact on retail survival. This is becoming a familiar refrain of turnaround professionals and bankruptcy attorneys.
“Look at what happened to Circuit City,” Snyder says, referring to the electronics/appliance chain that closed in 2009. The company owed more than $300 million when it filed. “You can’t pay that off. It’s impossible to reorganize them. We used to have more time to do work with. We’d cut expenses, change the format and reorganize. We can’t do that today.
“So some of the challenges have been on the legal side. It’s become much more difficult to reorganize these companies.”
Healthcare Vulnerable in 2017
Looking ahead to 2017, Snyder sees continued volatility in both the retail and energy industries. Healthcare, he says, is also vulnerable because of fluctuating reimbursals as providers and insurers battle it out under the Affordable Care Act.
“Reimbursal rates can swing pretty dramatically,” Snyder explains. “There was a big push last year with out-of-network hospitals and service providers. They were getting much higher reimbursement rates, and basically insurance companies shut that down. Now rural hospitals and small hospitals are struggling to survive.”
Looking ahead to more turbulence, Snyder has a bit of advice for companies in distress. “In trying to find a solution, sooner is better. The sooner you can get somebody in there to fix it, the better off you’ll be.”