Icebreaker does engage in turnaround interim scenarios. The reason for the “road block in the demand” we find is 2 fold like this
“The rational side”.
- Banks hold the control – debentures etc, veto on appointing administrators etc
- They are sitting on zombie companies without acting
- They are acting inconsistently
i. Pulling funds on businesses with no exposure
ii. Pulling funds on businesses within their agreed limits
- They use the traditional IBR – which is no more than a snapshot and provides no indication of a solution
- No one is lending against P and L, only assets
- ABL is becoming the new norm for corporates so there is a huge choice
- Most businesses are going straight into administration
- Businesses that get into trouble on the curve of death have gone too far too turnaround from existing financial resources “Alan Sugar sugar rightly says they therefore require a IP not more funding”
- There is no effective standard consulting or interim management solution that can deliver fast enough to stem the flow of cash
- You need to hook up with VCs / CFs cos you end up buying businesses from owners, we know about 150 VCs / IPs etc
- The owners are in control for as long as they can pre administration and its difficult for them to admit there is a problem
- Most owners don’t know the legality of the issues they face / how to act
- There’s no means of identifying
- IPs will take their fees without considering too broadly more complex ongoing solutions, leaving businesses unchanged post turnaround – just with more debt – Woolworths
- The issues are very complex and require a very effective team. And I mean a team not a group of individuals with an extended team of advisors
- You need inspired eyes and ears looking out with the right sets of eyes and ears to feed you work
- The best people in banks seem tied with bureaucracy e.g. recognising that a bit more cash to support a solution may work
“The people side (the less rational side)”
- The levels of market uncertainty are staggering; people don’t make decisions without a level of certainty
- Rational argument don’t work – you need executive coaching skills to unravel distorted thinking that takes place when people become very entrenched and stressed in survival mode
- You have to get the manager to realise there is a problem cos telling them don’t work
- You need to act decisively early and have the mandate to do so
- Most of the problems that are occurring are not business as usual – we find they are sliding into an abyss
- There are confusing messages been sent out on the reality, personally I have been of the view since early 80s that manufacturing has a far greater role to play in the long term solution for the UK and the sort or generalisations on what we should make / buy around technology is flawed.
That’s why icebreaker works as a team in the way we do and take these aspects so seriously. Having done this we have also realised that a team based interim approach is a whole lot better for standard interim work.
What’s pleasing is that the banks and others are waking up, and acting, BUT in the process many GOOD underlying businesses in the meantime will go bust.
On the last point – Beer and Partners I was an interim / potential investor on their pool, and found that there was again a reluctance to manage investments. The expectation has been for too long is that you do due diligence and it just happens, and you win some and lose some. I have never been willing to invest on that basis without taking a view of the viability and as required inputting into decision making.
What’s worrying is like any crisis people get drawn into areas that undermines their real responsibility, which sends organisations into freefall. What is missing though is the very specialised hit squads to resolve the complex matters that SMEs face, with those that are very skilled interim managers comfortable at operating at all levels don’t mind getting their hands dirty, and motivated dispassionately by making a real difference.
Note of caution it requires significant courage and carries significant professional risks; and no easy option to manage a program!
This was our summary of 2009 / 10 http://news.icebreakerexecutive.com/?p=278
I hope this helps fuel some other thoughts and prompt some others’ to share their experience.