The execution of a CSC Capital business turnaround incorporates the firm’s restructuring program for a particular distressed situation. The firm has been providing turnaround services since our founding. Nearly half of the over 80 corporate restructuring engagements we have undertaken have been turnaround situations, and on over two dozen of these CSC Capital has been appointed Interim CEO. The firm is uniquely positioned to apply a structured turnaround methodology and stewardship to the most chaotic of distressed environments.
National Home Center News ‘Cover Story’ in November 1996 read: “Company revises pay system to attract better sales personnel, improve teamwork and margins. Company profits from incentives created by Turnaround Specialist CSC Capital.” In the body of the article it went on to say:
“CSC Capital instituted computerized tracking of sales and margins by product category. The company was then restructured…into separate profit centers that would chart the marginsseparately…The results of the program were seen almost immediately. Within the first five months gross margin rose an average of 4 percent.”
The firm’s rapid response and hands-on advisory and/or interim management in turnaround situations has been numerous times documented throughout the years in many other business journals and trade magazines as well press releases and newsletters such as:
The Merchant Magazine (August 1997, May 1998, September 1998, April 2002), Building Products Digest (January 1998, November 2007), Sunriver Scene (July 2000), Prodealer (August 2000), Retailing (August 2007), Daily Journal of Commerce (September 1996, August 1998), Pro Sales (August 2002, June 2003, July 2003), Do-it-Yourself Retailing (February 1999, December 2001), The Business Report (July 1998), Building Material Retailer: Corporate Makeovers (August 1998), The Wenatchee Business Journal (December, 2003), The Lincoln Business Journal (October 1997), The Beacon Journal (June 1998), Cost Control Strategies for Wholesale and Distribution Executives (February 1999), and Oxford NW Newsletter (January 2009).
Turnaround clients have chosen CSC Capital because we have the skill and tenacity to deal with the day-to-day operations without sacrificing the strategic plan necessary to recover from the current adverse condition. We approach each situation in a matter-of-fact style, pushing the process at a sometimes dizzying pace, depending upon the severity. Normally the firm’s turnaround services are conducted in three stages: Emergency, Stabilization, and Return to Growth.
1) The Emergency Stage
The Emergency stage involves first realigning, adjusting and restructuring most if not all aspects of the debt and asset structure. Raising alternative sources of financing, securing both short and long term concessions and forbearances from major creditors, vendors and government agencies, replacing short-term debt with long-term debt, accelerating the collections of aging accounts receivable and bad debt, liquidating obsolete inventory, equipment and facilities into cash, and downsizing operations are among the immediate tasks that need to be accomplished. CSC Capital is very skilled at creating asset enhancement techniques that can be used to increase the credit worthiness of the distressed company and providing intervention management and execution services. This stage also requires that a sense of urgency be established throughout the distressed company. It is imperative that the current management team is able grasp the importance of this sense of urgency and is willing to assist the firm in communicating this throughout the company.
During this stage a number of elements from the firm’s restructuring program must also be initiated because even successfully creating additional cash flows, reducing expenses, securing debt concessions, and finding alternative financing will not provide the long-term solutions nor solve the current organizational issues that created the real financial problems. Our immediate objective is to position the distressed company in a better position to meet its financial obligations. The creation of pro-forma budgets, including both balance sheets and income statements by profit centers and a cash flow forecasting system are designed to quantify the results of the debt restructuring and expense reduction strategies and accomplishments. This will allow the firm to better position the company for CSC Capital’s restructuring efforts through the Stabilization stage.
2) The Stabilization Stage
The Stabilization stage first requires that CSC Capital has already established communications with the distressed company’s financial institution, and has begun negotiations with alternative sources of financial assistance. Whether traditional commercial debt or private equity financing, asset based loans and working capital credit facilities, short-term bridge financing, venture capital, or factoring and hard-money lenders, the firm approaches multiple sources from international, national, regional and local contacts. CSC Capital’s reputation in restructuring and the turnaround efforts thus far speaks volumes in procuring interest in capital markets thus securing an appropriate financing vehicle. Financing, if still required must be obtained before exiting this stage of the turnaround. Finally, if necessary or desired by the firm’s client a merger, spin-off and corporate sale process may be initiated during the Stabilization stage.
Further, during this stage the on-going corporate restructuring is critical for success, as any lender, equity partner, or financial buyer must be confident that the capital invested will provide a return of their investment. The formation of a powerful guiding coalition, training the top management team in the budgeting and forecasting of the separate profit and cost centers based upon the reorganized organization, the continuation of downsizing operations and asset sales through recommendations of top management, breakeven and costing procedures that increase gross margins by each product line, the comparison of budget vs. actual numbers over time, executive search, and the implementation of new sales commissions and productivity-based incentives and compensation packages company-wide are by far the most important internally created stabilizing factors.
3) The Return to Growth Stage
The Return to Growth stage is completed once a distressed company’s strategic leadership is totally engaged by the firm’s explicit change agenda. This provides long-term continuity to on-going changes in the face of day-to-day operating pressures while maintaining the CSC Capital restructuring program hence forth. This stage is probably most important because it requires that all corporate restructuring designs and methods have been completely implemented into the client company. The creation of a new corporate vision, the communication of the vision, empowering others to act on the vision are necessary components for the Return to Growth stage to be successful. Moreover, because massive cultural changes have been introduced they must now be institutionalized into the company. Institutionalization means that a once dysfunctional corporate culture has been changed into a productive, efficient, revenue driven and profit oriented culture; from the receptionist to the CEO. CSC Capital’s Return to Growth stage institutionalizes the following for all employees:
- Building a knowledge-based company
- Developing shared vision and goals
- Changing the values and beliefs from the old culture to new
- Translating new values into concrete organizational behavior
- Reorienting old power structures to support new values and organizational behavior
- Harnessing high impact management information and financial systems
- Creating superior financial performance requirements
- Appointing excellent leaders with vision
- Setting realistic management and employee performance goals
- Standardizing executive and employee evaluation and accountability system
- Creating Corporate and Business Unit strategies that can achieve concrete objectives
- Developing a process for the continuation of managing change for all employees
While the above list is not all inclusive it outlines in general that a successful turnaround is ultimately about changing the work habits and corporate values of management and employees. However, such results can only be accomplished through the role of leadership. In a November 2007 article in Building Products Digest entitled “What to look for in a turnaround specialist,” CSC Capital explained “Leadership is distinctly different from management. Management deals with day to day operations and structure, leadership is about the future, developing a shared vision, creating core values, and culture.” In short, while leadership is rarely mentioned in turnaround situations, only leaders can institutionalize the necessary corporate changes from crisis to recovery. Further, leadership ability is often more critical than industry savvy in a turnaround, though having both qualities is the perfect balance. But if one is to choose having the guts of a leader is preferred over knowing the guts of a business. Once the institutionalization of the new corporate culture is complete, only then does CSC Capital consider the turnaround a success.
The most general lesson is that the turnaround process conducted by the firm is one that goes through a series of stages, sometimes requiring a considerable length of time. Skipping steps creates the illusion of speed and never produces satisfying results. A second general lesson is that there can be no mistakes in executing the necessary components in any of the stages; mistakes can have a devastating impact on a company’s survival. A third general lesson is that all three stages are important for a successful turnaround. Clients trust CSC Capital to be right with no mistakes; and in crisis situations they deserve nothing else.