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Turnaround and Restructuring

Whether done under the protection of a Chapter 11 filing or in a consensual out-of-court environment, a company must successfully rethink its priorities toward customer fulfillment and the way that work is executed. It must adopt a new model (i.e., the turnaround plan) where the company is organized around process, where value-added partnering with key customers and vendors is achieved, and where employee compensation is based on measurable individual and company performance criteria.

Many people misunderstand the concept of a turnaround plan. A turnaround plan is a summary of the key issues that must be addressed (viability issues) and the fundamental changes that must occur to achieve viability. Methods to achieve these changes are basic management techniques learned from experience in dealing with financially distressed businesses, which are not communicated via textbooks or a written step-by-step guide. Existing competent management must fully understand the goal and contribute its expertise and efforts to create the change.

The execution of the turnaround plan (the process) includes stakeholder management, the reorganization of the company around core profitable business segments (through the use of cross-functional project teams), the installation of core management processes, and the recapitalization of the balance sheet through operational cash flows and restructured debt.

Stakeholder Management - Lake Pointe professionals are experienced in managing and bringing to consensus all the stakeholders involved in a turnaround engagement.

Reorganization Around Core Profitable Business Segments - Trends in successful reorganizations, whether under the concepts of total quality management or process reengineering, have continuously moved toward flatter organizations centered around core products and customers. In a Lake Pointe turnaround engagement, senior level company executives create and implement the agreed upon turnaround plan elements through the use of cross-functional project teams. These project teams focus on the company’s organization structure, employee utilization, core customer/product identification and fulfillment processes, the cash conversion cycle and continued stakeholder management.

Installation of Core Management Processes -
"Companies are run by process. People manage the process." In companies experiencing financial distress, focused execution on cash management, production scheduling and sales & marketing processes are critical to a company’s survival. Facilitated by Lake Pointe, the following three (3) processes are implemented as part of the turnaround plan.
  • Cash Management Process - As designed by Lake Pointe, this process culminates in a weekly meeting attended by all department heads and is focused on accounting for actual cash results for the week and on forecasting those items that impact cash in the near term. Consequently, items reviewed and discussed include estimated upcoming billings, margins, accounts receivable collections, bank and vendor requirements, purchase orders, manpower and equipment requirements, etc.
  • Production Scheduling Process - These weekly meetings are attended by employees from production (managers and floor workers), purchasing, sales and accounting. The purpose is to leave the meeting with a clear understanding of the production schedule for the next week (with no changes to production permitted during the week), prioritization of the backlog to meet customer satisfaction, purchasing requirements, manpower scheduling by work cell, etc. The information generated by these meetings becomes necessary input to the weekly cash meetings. We have seen workforce reductions of 34% with increases in production of 80% (in three weeks).
  • Sales Management Process - In crisis situations, you are generally forced to utilize the existing sales force to maintain or improve sales. While we execute a number of various sales processes, they all tend to be focused on limiting the sales force's attention to the top 20% of customers and prospects that are likely to produce 80% of the gross margin dollars. All of the processes used include one-on-one weekly meetings with each salesperson to review the progress made each week, discuss sales approaches to customers and prospects, and schedule the next week's plan.
In a very short period of time, these three basic processes identify weak areas in the company and focus the entire management and workforce on the basics. It is our experience that in very short periods of time, the value created from these processes is at multiples of the fees necessary to achieve them.

Recapitalization of the Balance Sheet through Operational Cash Flows and Restructured Debt - Once the company is stabilized (consistently generating better than breakeven performance) Lake Pointe can assist the company in:
  • Composition agreements with creditors (e.g., conversion of vendor debt to long-term notes, compromises in principal),
  • Refinancing of existing debt with new lenders (e.g., preparation of loan solicitation packages, identification of alternative lenders, assistance through the loan underwriting process), and
  • Equity sourcing.
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