The Turnaround Management Industry has been trending down for at least 5 years. While many industry experts had hoped that trends would have moderated by now, the industry weakness continues. Many of those same experts now think that the turnaround industry may never again return to the way it was in the early – mid 2000’s. They as I believe that the changes to the industry have been so fundamental and structural in nature that the industry is changed forever – and at a much smaller size.
This sentiment was recently the basis for a TMA sponsored webinar entitled: “Shifting Opportunities for Today’s Restructuring Professionals”
During that webinar the professionals giving it speculated that the reasons the turnaround industry was in decline were many, and constituted a “perfect storm” of downward pressures.
The TM Industry’s Perfect Storm of Issues
- Low GDP Growth
- Low New Leveraged Loan Demand
- Lender Competition
- Kick the Can
- Zombie Funds
- Sophisticated Stakeholders
- BAPCA
- 2nd Lien Mezzanine Funds
- Loan to Own
- Debt Trading
- 363 Sale vs. POR
I believe that the Webinar actually missed one other major industry issue; new loan coverage requirements for major commercial lenders. With the adoption of Basel III and Dodd Frank coverage requirements, banks are now loath to declare loans TDRs or distressed as they will then have to cover those loans with more capital than in previous years. Obviously, these lenders would much rather put that capital to use in other ways. Accordingly, in today’s new world, before loans are allowed to become TDRs, banks are refinancing them or selling the paper. In either of these now common cases, traditional turnaround consulting work is rarely deployed.
The seminar concluded that turnaround management firms must look at different types of work and expand their “consulting tool kits” in order to survive, much less to grow over the long term. Some of the suggestions for expanded work included:
- Helping lenders and companies to redeploy capital
- Providing guidance on organizational realignment
- Change Management
- Operations Improvement
- Post-Acquisition integration
- Transaction Due Diligence
- Board Advisory
In addition, the seminar stressed that turnaround management professionals need to target a much broader consulting market that includes:
- Non-Traditional Lenders
- Investment Banks
- Direct Middle Market and Large Companies
- Family Owned Businesses
- Boards
- C-Level Middle Managers
Finally, the webinar focused on how turnaround management firms need to “expand their tool-kits” into strategic, sales and marketing consulting. Specific areas of recommended focus included:
- Customer Rationalization
- Pricing Optimization
- Sales Force Effectiveness
- Channel Strategy
- Cross Selling and Bundling
- Market Share Growth
While these recommendations make sense for a variety of reasons, they are difficult to execute and come with a high risk, reward coefficient.
This is exactly where MRA aims to help turnaround firms. MRA has helped a number of firms to navigate the successful deployment of new and profitable marketing and sales consulting services. For more information on case studies and approach, click through on the blog posts below or call MRA at 973-452-2584
A Niche Revenue Platform for Turnaround Management Firms