PODCAST HIGHLIGHTS: Turnaround Insights During the Pandemic
Baird's Podcast Features Alvarez & Marsal's Restructuring & Turnaround Expert Brian Whittman
During these unprecedented and uncertain times, Baird is committed to continuing to share insights from our industry experts, as well as those of our valued partners. Here are highlights from a recent podcast with Rhett Braunschweig, Director with Baird Global Investment Banking, interviewing Brian Whittman, managing director with Alvarez & Marcel, a global consulting firm that provides advisory, business performance improvement and turnaround management services to corporates. At A&M, Brian is a managing director within their Restructuring & Turnaround Group in Chicago. He's also the co-head of the Midwest region.
In this summary, Rhett and Brian discuss what firms are currently doing to preserve value – and more importantly, what they're doing to position themselves for the inevitable recovery.
Executive Summary
Brian Whittman discusses his roles serving the clients of Alvarez & Marsal (A&M), including both interim management position and advisory roles.
From an interim management perspective, Brian recently served as the CFO of Horizon Global, a Detoit-based, publicly traded maker of trailer hitches and towing products. As interim CFO, he led the process of renegotiating covenants, raising additional capital and putting together a business plan to continue its turnaround. In the advisory space, he is working with a number of clients, both in and out of bankruptcy. He is also advising non-profits during the current pandemic.
Understanding that no two restructurings or turnarounds are the same, how does today differ versus the past?
What we're seeing today differs strikingly in terms of breadth, with nearly every industry and every company being affected, as well as how quickly and deeply this has happened. Seemingly overnight, this evolved from a supply chain issue to ubiquitous shuttering of non-essential production and distribution facilities across the US.
From both operational and financial perspectives, what differs today versus past experiences.
Operationally, A&M is often brought in to a company that has been experiencing operational challenges for some time, and A&M makes changes to improve efficiencies. Typically, we can assess liquidity / runway and can make changes in a generally stable situation. Now, instead of seeing clients where revenue has declined year-over-year, we may see similar sized declines on weekly basis.
From a financial perspective, banks have been generally accommodating, but new / additional financing is difficult to acquire. Government support is available, but specifics differs dramatically by industry.
How has recent activity trended at A&M? What are the difficult inquiries you're getting from clients?
This had been already a busy time for A&M, and that has escalated. There are certain industries that were already struggling, including those impacted by tariff issues. Oil and gas has been in a difficult position for some time. Now, the breadth of industries making inquiries to A&M has dramatically increased, and includes companies that have never had previous liquidity issues.
If you were running one of these organizations today, what are some of the basics you would be doing? And for companies in more dire straits?
The focus immediately is what can you control – cost – and wherever possible, matching outflows to inflows. Unfortunately, we are seeing cuts in payroll, including furloughing and temporary salary and benefits reductions, as well as seeking short-term forbearance with landlords and deferred payments to suppliers. Also, CAPEX is becoming much more difficult.
On the revenue side, continuing collect receivables and expand receipts where possible. For example, shifting sales to online channels. Also, government programs should be investigated.
First and foremost, you need to save the business and live to fight another day. That means you have to preserve some liquidity. This is also an opportunity to examine low performing locations / product lines.
It appears more likely that we’re going to have reduced demand for an elongated period of time. How does that impact what you’re doing?
Additional monitoring is key: competitors, adjacent industries, adjacent geographies can all provide vital information.
Out of curiosity, what is the not-for-profit world seeing?
A&M has been talking to several non-profits over the last few weeks. Because many of their fund-raising programs are face-to-face events, they are seeing a disruption there. At the same time, their missions often involve helping people in trouble, so there is an increased need for the programs they support.
In an industry and in a role where face-to-face interactions are critical, how do you effectively manage business change for your clients?
This is definitely is a challenge. We typically are on-site at our clients, having face-to-face meetings with leadership, lenders, and other stakeholders – so the challenge is to build relationships and trust, and gathering information through alternative channels.
Wherever possible, we take advantage of technology: audio conferences and video conferences are integral parts of that. You’re not going to have the same types of informal conversations, so you need to supplement those more formal interactions with on-going dialogues elsewhere. In a word, communication is key.