Best Practices for Turning Around Distressed Companies: Effective Communications and Outreach Protocols
In this series, Intralinks' Matt Porzio discusses the importance of transparency and communication when managing the recovery of a distressed asset.
10 February 2015
This is the fifth blog in a series of articles about how to best execute turnarounds. In this post, Matt Porzio, VP of strategy and product marketing for Intralinks Dealspace®, discusses the importance of transparency and communication when managing the recovery of a distressed asset. For the first four installments, Intralinks partnered with Yoav M. Cohen, managing partner and CEO of NYC Advisors, LLC, to provide insights on the importance of creating a written business plan and controlling costs, communicating with various stakeholders, cases of successful turnarounds, and instances in which a sale was the best option.
When a company has liabilities that will be difficult to meet with current or projected cash flows, it’s imperative to understand the degree of capital gaps and the potential impact.
Are there impending events that can trigger a covenant breach? How will any revolving line of credit be impacted? Can you negotiate a forbearance agreement to provide more breathing room? Will dilution be an issue stemming from recapitalization? The key to managing these events lies in knowing that, while you may not have control over what will ultimately happen, you can anticipate your exposure for each trigger event and prepare appropriately. As we learned in a previous post in this series, one of the key actions you can take with external stakeholders is establishing a good-faith and transparent communications regime.
Any type of renegotiation package, extension, forbearance, supplier/customer retention, or tax issue will require stakeholders to gain comfort in your roadmap to rectification. Having a good-faith disclosure mechanism for external communications will assist in establishing trust. Liquidity events will require proper messaging and positioning. It is essential to be forthright with lenders, and others that may be in a position to scrutinize liquidity, by presenting dynamic, reasonable, and objective financial information through an organized system. Clients who engage collaborative technology for restructuring or distressed-related situations often comment that systematic transparency goes a long way in re-establishing alignment with external stakeholders.
Utilizing a purpose-driven disclosure platform helps you rapidly deploy organized content to external parties, all while maintaining full control of this confidential information — positioning your plan accurately and keeping people and the process on track. Whether you need to establish a consistent disclosure cadence or transition your situation into a possible sale of assets, preparing for a disclosure or liquidity event in advance of a forced situation will aide you in making better business decisions and avoiding the worst-case scenario.
Matt Porzio joined Intralinks in 2003. As SVP Marketing & Strategic Business Development, he is responsible for managing and driving the strategic direction for Intralinks Dealspace including virtual data room and full deal lifecycle solutions for the M&A, Private Equity, Advisory, Corporate Development and Restructuring communities. Before joining Intralinks, he was a senior associate at Metzler, a German advisory firm, focused on cross-border M&A transactions.