Turnaround Management

Circumstances requiring a turnaround management process

The drivers of the requirement for a dedicated turnaround management process include:

  • Deteriorating financial performance and cash position.
  • Necessity for operational and management change to “fix” the company.
  • Limited management ‘bandwith’ to deal with the relevant issues.
  • Stakeholders losing trust in or no longer supporting the business.
Why go through a turnaround management process, is it worthwhile?

To make a turnaround process worthwhile there must be a reasonable prospect of financial upside being created for the stakeholders involved.

Positively, a survey conducted by the Turnaround Management Association showed around 50% of companies originally classified as salvageable are saved.

Before going into a turnaround management process an assessment must also be made of:

  • Costs –  a turnaround management process typically involves expenses from advisers and financiers/investors for debt and equity restructuring. It must be ensured that these costs do not outweigh the financial upside created by the turnaround.
  • Risks – the risks of a turnaround can be such as to make the prospects of a successful outcome occurring too remote and therefore the process is not worthwhile.
Process and stages of a turnaround management
Each turnaround is different involving some or all of the following:
  • Crisis stabilisation.
  • Internal and external stakeholder management.
  • Structural and management changes.
  • Operational improvements.
  • Strategic changes.
  • Financial restructuring.
  • Change management.
  • Independent financial and strategic review.

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