By Bassem A. Mansour
Co-Chief Executive Officer, Resilience Capital Partners
Economists rightly celebrate the “creative destruction” of capitalism, the powers that result in the birth of new industries, new companies and even new ways of doing business. However, value isn’t generated just by creative destruction: Sometimes it can be generated through preservation, too – helping companies recover from special situations, adapt to paradigmatic changes or simply survive downturns in business or economic cycles.
I was reminded of this recently when I served on the “Turnaround Tools” panel at the 30th annual meeting of the Turnaround Management Association, a professional community that works to save distressed businesses, help management survive existential crises and assist healthy companies in avoiding such situations. We were asked to talk about the tools of the turnaround trade, everything from cash flow, appraisal, and historical financial tools to liquidation and wind-down tools.
I and my fellow panelists – William Snyder of CR3 Partners, Brian Maloney of AlixPartners and Natasha Labovitz of Debevoise & Plimpton – each work in different aspects of private investing, and each of us brings very different perspectives to our work. William has participated in the restructuring of hundreds of companies over the past 40 years, Brian specializes in underperforming companies in corporate recovery situations and Natasha has represented debtors and creditors in and out of bankruptcy and in cross-border insolvencies.
Despite our different backgrounds, we all agreed that turning companies around creates real value – for business owners and shareholders, employees, customers and other stakeholders. But turnarounds won’t succeed without the right approach, and that means selecting the right toolbox of analytics, strategies and solutions.
When I and my colleagues at Resilience Capital Partners invest in distressed companies, we use sophisticated analytics to identify the needed changes in three key areas: Personnel; governance; and cash flow and finances. Without the right people, the right structure and the right financials, no distressed company can survive adversity, and even the strongest company can find itself in dire straits.
From identification of potential investments, to the due diligence phases, to pre-closing analyses to the post-closing, those seeking to help companies turn around their prospects need to be clear-eyed about their prospects and realistic about the likelihood of success. Sometimes, sadly, companies can’t survive, at least not in their present form. But there is nothing like helping people in a company that has encountered rough times meet the challenges they face and emerge even stronger than before. That’s the most satisfying aspect of our business.