Turnaround firms such as Windsor Associates receive calls from the business owner, shareholders (including investors) and professional advisors to business' such as attorneys and accountants when a calamity or material change in the company’s fortunes has taken place. The loss of a key customer, a significant new product or service not appealing or reaching the marketplace as anticipated and demands for payment from critical suppliers or lenders are examples of events that may threaten the on-going viability of the business. Generally a loss of confidence in the business is taking place, either on the part of management itself or that of the company’s suppliers and other creditors.
The objective in a crisis situation such as this is to determine first and foremost whether the business remains sustainable. Questions an owner may be thinking about or being asked may include:
- Is the company profitable?
- Which products or service lines are profitable and which ones are less so?
- Which customers, products and services account for the majority of volume and contribute to overhead?
- Is the company confident it has a pricing methodology that includes all costs of doing business?
- Is employee staffing levels appropriate for amount of product throughput generated?
- Does the company have sufficient cash flow and if so does it fluctuate in certain periods of the year?
- What can the company afford to repay to the supplier or bank if it were to modify payment terms?
The objective in turnaround situations is to first assess the on-going viability of business including if there remains a profitable core of products or services around which the business can be restructured. If a turnaround opportunity exists, Windsor assesses the appropriate staffing and overhead levels possible for the business to remain competitive. After discussions with the company’s shareholders, lenders and suppliers, we determine how the company’s liabilities can be restructured and assess whether this can be best accomplished outside of a court proceeding or within a bankruptcy forum. Either way, preserving the underlying business value is of paramount importance.
Turnaround and Restructuring Case Study
Multiple location, national food franchsee in Chapter 11 bankruptcy. In need of restructuring store franchise and lease agreements as well as mortgage loans with lender under a reduced store footprint. Read how we provided value to this client.