Best Practices for Turning Around Distressed Companies: Success Stories

In this "Best Practices for Turning Around Distressed Companies" post, Yoav M. Cohen will share examples of companies that have had successful turnarounds.

15 December 2014

Best Practices for Turning Around Distressed Companies: The First Steps

In this new series, Intralinks has partnered with Yoav M. Cohen, Managing Partner and CEO of NYC Advisors, LLC, to learn more about how to best execute turnarounds. In the first installment, Yoav discussed the importance of creating a written business plan, or a roadmap, on how to control costs, and how to deal with your employees. In the second installment, Yoav discussed how to deal with customers, vendors, bankers, and the tax authorities.

Following these steps has helped several companies conduct successful turnarounds. In this installment, I will discuss a few success stories of companies where I implemented this process.

A $50M public telecommunications company had a successful turnaround from a $4.5M loss to a $2M and $2.8M profit in the following two years by:

  1. Reviewing their existing product line and eliminating a losing product line that caused most of the $4.5 million loss
  2. Reducing COGS by $2.5M over 18 months through negotiations with offshore and domestic suppliers
  3. Restructuring their accounting department and accelerating monthly closing from 17 days to five days
  4. Implementing a new ERP system, improving efficiency and creating insightful management reports (such as daily dashboard, and weekly, monthly and quarterly key performance indicators)
  5. Acquiring three companies, broadening product offerings, increasing revenues and net profits

These achievements were a result of a roadmap that was developed by the telecommunications company’s management — incorporating the steps discussed in the action plan. Specifically, this company concentrated on the first two steps of the plan. This allowed them to control cash and cut unnecessary costs as well as restructure the Board of Directors, bring in new senior management and enjoy the full cooperation of all employees. The company also had to look externally; specifically, working with their suppliers to reduce costs was key. Throughout the entire process, the company’s banks were all involved which helped the bankers get comfortable enough with the results of the turnaround that they offered the company an acquisition line of credit, enabling them to buy three companies and continue on the path to success.

A publicly held, global pharmaceutical company successfully turned around from a first quarter loss of $235K to a year-end pre-tax profit of $790K, and next year first quarter pre-tax profit of $1.1M by

  • Re-engineering all internal controls and establishing infrastructure for new financial reporting
  • Implementing new financial and ERP systems in Israel and Canada
  • Working with auditors to establish tax planning programs for the future while reducing taxes by $700K
  • Working with bankers to re-structure their line of credit
  • Replacing key personnel with new professionals

Here, again, the roadmap assisted by allowing them to hone in on the issues at hand. Reaching out to external parties — in this case, auditors — was particularly helpful because they were able to help with formulating and implementing a new global tax strategy, enhancing internal controls, and choosing a new ERP system.

There is rarely a situation that is insurmountable. Being able to recognize that a problem exists, then decisively dealing with it is key. More importantly, it’s OK to ask for help. If your skills are not suitable for this task, then call in an expert who can help you lead the turnaround, or help sell your company at the best price possible given its distressed situation.

Yoav M. Cohen

Yoav M. Cohen

Yoav M. Cohen is the Managing Partner of NYC Advisors, LLC, a business advisory firm providing interim and part-time CFO services, corporate restructuring and turnarounds, and other profit enhancing services.