The Art of the G2 Turnaround
When crises like the pandemic wreak havoc on businesses, having the right resources in key leadership roles determines whether a Company will successfully navigate a distressed turnaround situation or not. Rapid
and decisive crisis stabilization determines success. G2 Capital Advisors’ (“G2”) primary objective in a turnaround is to establish a capital and operating structure in line with the strategic priorities and cash generation of the enterprise. In partnership with key stakeholders, G2 extends the cash runway of the Company to create time for revitalization. This liquidity management exercise requires information to be developed and presented to a host of critical players, including but not limited to, shareholders, lenders/creditors, management, employees, customers, vendors, and any court appointed Trustees, if so needed.
Many turnarounds fail due to a lack of alignment between the Board of Directors and executive management on a strategy and timing to fix the Company. Bringing in a trusted third-party restructuring advisor, such as G2, to oversee the turnaround as an independent fiduciary can achieve such strategic alignment. Not all restructuring advisors are created equal and each situation prescribes particular skill sets and capabilities to effectively navigate the corporate turnaround. Of utmost importance, every restructuring and turnaround 1) must have a foundational plan, and 2) that plan must be published and communicated broadly. The entity or entities managing the turnaround must draw ideas out of the Company’s employees and stakeholders and galvanize them into action with an action strategy with specifics on what, when, and how. In the post-COVID environment, planning and communication have become even more critical as certain industries find themselves at a pivotal juncture. For many companies, massive strategic and operational shifts, and even fundamental changes to existing business models, will be necessary for a turnaround to be successful in this “new normal.”
Our successful turnarounds are accomplished by focusing on 4 C’s – Communication, Concentration, Cost Control, Cash Flow. Traditionally Financial and Operational focused restructuring firms stay on opposite sides of the fence. For middle market companies, hiring separate firms is cost prohibitive and inefficient. G2 is uniquely positioned to provide a one-stop shop with a fully integrated team comprised of operational, financial, and investment bankers to address stakeholder needs and maximize ultimate recoveries.
To address critical aspects of a turnaround, G2 proposes a two-pronged approach to focus on both Financial and Operational Restructuring elements. G2, as an integrated firm, can manage both aspects of financial and operational restructuring within one team. Usually, a transactional Chief Restructuring Officer (CRO) where there is a strong management team, or an operational Chief Transformation Officer (CTO) where the advisor steps in to run the Company day to day. G2 is differentiated in our ability to provide both functions to our clients with foundational industry experience:
Owning fiduciary responsibilities and represents an independent voice using the Company’s financial data to address concerns of all stakeholders.
- Reports to Board of Directors.
- Serves as liaison to lenders, creditors, etc.
- Manages all external communications.
- Leads negotiations with vendors or customers.
- Establishes go-forward operating cash flow budget.
- Generates required reporting.
- Manages any legal filings.
- Develops formal Restructuring Plan, driving to a successful Restructuring Transaction.
Working with existing management to determine appropriate operating parameters.
- Identifies useful assets and operations.
- Discontinues non-performing assets, divisions, products, etc.
- Prioritizes strategic initiatives.
- Identifies a few areas for concentration.
- Implements cost control measures.
- Minimizes Company cost structure.
- Manages internal communications with employees. Supports external communications.
- Sets go-forward performance targets.
- Augments interim management needs.
- Architect and executor of Revitalization Plan.
G2 believes any changes in organization culture will be driven by a vision, encourage feedback and require prompt action. The CRO in conjunction with a Company’s CEO and management teams must champion that change by cultivating it within the organization. By actively engaging all employees and helping them understand the new direction of the Company, G2 can achieves multiple objectives:
- Managing stakeholders
- Implementing rolling go-forward 13-week cash flow
- Developing strategic priorities (and if necessary, pivoting to succeed in the post-pandemic “new normal”)
- Stabilizing operations
- Identifying performance / process improvements
- Driving organizational change
- Identifying Company structural change
- Instituting risk mitigation parameters
- Identifying new financing needs
- Supporting clear communications
Frequent and continuous communication with all stakeholders and interested parties remains critical. G2builds confidence and trust within these groups through transparency and honesty. G2’s decisive and clear actions thereafter drive the successful turnaround process.
G2’s highly capable team, including seasoned interim CFOs, Controllers, or FP&A resources, not only can help our clients navigate challenging liquidity or performance environments, but also can drive improvement in core finance/accounting functions. Feel free to reach out to the G2 team to learn more about the approaches we are using across our 45 plus clients in our industries of focus.