What is Corporate Renewal?

Corporate Renewal involves the formulation and implementation of a strategic plan and a set of actions for the turnaround and restructuring of a business, typically during times of severe corporate financial distress. Often this turnaround of the business requires the assistance of a turnaround professional with specific expertise and experience in the corporate renewal/turnaround profession.

Since the early 1990’s corporate renewal has gone from being an unknown and little used skill to being a full-fledged business discipline widely practiced and trusted by managers. Much of that growth and development resulted from the professionalization of the field by the Turnaround Management Association (TMA). TMA is the largest global professional organization dedicated exclusively to the corporate renewal profession. Established in 1988, TMA has nearly 9,000 members in 45 chapters, including 32 in North America, and one each in Australia, Brazil, the Czech Republic, Finland, France, Germany, Italy, Japan, the Netherlands, Southern Africa, Spain, Taiwan and the UK, with a chapter in formation in China. All TMA members must sign a Code of Ethics each year specifying high standards of professionalism, integrity, and competence.

Why Use a Turnaround Professional?

Periods of economic and financial distress pose special challenges to the capabilities and decision-making processes of most management teams. Not only do such occurrences increase demands on existing managerial abilities, but they also create a whole new spectrum of legal, accounting, and financial considerations that impact the renewal process. Today’s increased competition, cyclical and volatile financial markets, and economic trends have created a climate in which no business can take stability for granted.

As once-stable, profitable, and competitive companies struggle to improve operational and financial performance, the expertise of corporate renewal professionals is critical to this revitalization process. The chances of successfully navigating the corporate renewal process increases through the use of qualified turnaround professionals, who have the experience and expertise to apply sound practices of turnaround management to failing businesses.

Harbour Bridge Ventures (HBV) Principals are long standing members of TMA and have access to the required resources and the experience to manage the turnaround of a business in a time of crisis.

HBV professionals can enter a company with a fresh eye and complete objectivity. This allows us to spot problems that may not be visible to company insiders. HBV has no political agenda or other obligations to bias the decision-making process. This enables us to take sometimes unpopular, yet necessary, steps required for a company’s survival. In corporate renewal engagements, experience within a particular industry is less important than experience in crisis situations when a company is facing bankruptcy or the loss of millions of dollars in revenue. Like an emergency room doctor, HBV professionals must make critical decisions quickly to staunch the financial bleeding and give a patient the best chance for recovery. Operating in the eye of the storm, HBV will deal equitably with angry creditors, frightened employees, wary customers, and a nervous board of directors. Clearly this is no assignment for the faint-hearted. That is why HBV’s professional corporate renewal experience and professional disciplines are so important in such crisis situations. HBV professionals can preserve and often restore value when the only other alternative may be failure or bankruptcy.

What Causes Businesses to Fail?

There are generally a limited number of “root causes” for the failure of a business:

• “Acts of God” – Certain risks may occur and cause irreparable damage to a business (despite proper anticipation and thorough preparation)
• Poor vision or understanding of the market and the competitive landscape
• Inability to anticipate and properly prepare for change
• Poor strategy
• Poor business model
• Poor execution

Underlying many of the above root causes one often finds one or more of the following symptoms that likely contributed to the distress:

• Lack of expertise or experience within the management team
• Market circumstances or changes
• Challenging economy
• Threat of bankruptcy of a holding company, major supplier, or major customer
• Board level controversy
• Fraud or at least insufficient financial controls
• Overly optimistic sales/revenue projections
• Financing problems, liquidity crisis, excessive debt burden, undercapitalization
• Operating cost levels are too high
• Very strong, successful competitor(s)
• Excess capacity (over-investment)
• Insufficient resources (under-investment)

What are the Steps in a Turnaround?

HBV employs a five-step process in our renewal engagements analogous to that employed in the medical profession:

1. Diagnosis – Determine the chances of the business’ survival, reasons for failure, appropriate strategies for survival, and initial action plan
2. Triage – Take immediate action to treat the wounds endangering the company’s survival. This is necessary to provide the time and opportunity to effect necessary changes.
3. Treatment - Develop and Implement the action plan to treat identified problems and effect necessary changes to turnaround the company’s fortunes.
4. Stabilize the Patient – Once the emergency rescue plan has been implemented, it is necessary to turn attention to getting the company back on track to sustainability, increasing profitability, and generating acceptable cash flow and returns on assets and equity.
5. Restore Long-Term Health – Effect long-term structural changes necessary to sustain improvements and ensure the long-term health of the business.