Friday, July 05, 2013
"5 Questions" with John Collard, Strategic Management Partners
By Danielle Randall-Saba, Source Media John Collard
, is chairman and CEO of Strategic Management Partners
, a Maryland-based turnaround management firm specializing in interim executive CEO leadership, private equity advisory in distressed situations, and asset & investment recovery. He is the latest participant in IMMP's "5 Questions." IMMP:
Congratulations on the firm's outstanding contributions and achievements, including your individually being inducted to the Turnaround Management, Restructuring and Distressed Investment Industry Hall of Fame. What do you think is the state of the new economy and how has it affected companies? Collard:
US companies have learned to adapt, and provide more for their customers with less. There have been financial restructurings that get press coverage, and there have been operational restructurings, which don't attract as much attention. These operational restructurings prepare the company to deal with less labor-intensive solutions, and more automated production.
Those that adapt will do well to survive, and in the stock market. Those who don't, or can't adapt, like small businesses with less resources are having a much more difficult time. IMMP:
What are some early warning signs a company is in trouble to date? Collard:
First, is the inability to bring in new revenues at recurring rates. A "dollar" must be a "dollar of revenue" before it can be "any other kind of dollar" to cover costs. In a distressed environment companies don't market and sell very well. In the troubled economy this is even more difficult because buyers are more conservative and not in buying mode.
Secondly, ineffective communications will kill a business. If you can't describe the features and benefits of the product, you can't compete. If you can't describe what you want employees to do, then you leave the company without a steering wheel.
If you are hiding what is really going on, there is trouble for sure. Just listen to the news on hearings before Congress: "…I can't tell you who is responsible…", or "…I take the Fifth, but pay me…", or "…What difference does it make…", or the list goes on. These comments just encourage more questions, and cause me to ask, "What are you hiding, and why?"
When I go into a troubled company I know that I am looking at the tip of the iceberg. What I find out after hours--or even days--determines if the company can be saved and often the plan for saving it. Sometimes it is too late and we liquidate. IMMP:
What is the rationale behind a buyout or a restructuring? What is your advice for the management team about to embark on either path today? Collard:
Clearly the dilemma is based upon how the management team is performing. If the team is doing well the buyer usually wants to invest around the team and will encourage them to stay, while dealing with other problems. In this case the buyout or restructuring could be positive, then I would advise working with the buyer and avoid stave off.
On the other hand, if the team is not performing, the owners may be forced to sell in order to recover what they can. In this case the management team is much of the problem and should go anyway, then I would advise them to prepare their resume, because they have little recourse. IMMP:
What are the key components in the turnaround process? What is the fallout its employees and third party service contractors face in working for a troubled situation? Collard:
You need three things to turn around a troubled company—Management, New Business Development, (which is tough in this economy) and Transition Financing (when banks aren't lending any money.)
It is much more difficult these days to execute the traditional turnaround. There is much money available waiting for the good investment or loan, it is no secret that the criteria to obtain it is stringent and must demonstrate the "good deal."
When companies are on the verge of bankruptcy, they are there because cash flow doesn't exist and the entity can't meet its obligations. This is particularly troublesome when the management has stolen from "trust funds" or allowed value to deteriorate.
The real tragedy is often the employees who trusted the management, company concept, are now without that nest egg they hoped for in the future. There are sometimes remedies to save these assets in distressed situations, unfortunately. It is on a case-by-case basis. IMMP:
What does it mean exactly, when a distressed situation reports it is 60% funded, and how likely will it be able to meet its outstanding pension obligations in turnaround/rehabilitation mode? Collard:
There are many companies that leave unfunded obligations and the employees suffer.
Bankruptcy is a process that defines the order in which funds will be received when the company liquidates—first to secured creditors and taxing authorities and trust fund obligations, then others. It is not uncommon for unfunded pensions to suffer.
We live in a society that doesn't like to save or plan very well; we pay for yesterday's obligations with today's dollars. Only one-third of pension plans are funded today. Social Security pays recipients out of today's operating dollars versus only contributions, which is why we will become underfunded. Pensioners, caveat emptor, plan for your future. ### Principal:
John M. Collard is a Certified Turnaround Professional (CTP), and a Certified International Turnaround Manager (CITM), who brings 35 years senior operating leadership, $85M asset and investment recovery, 43+ transactions worth $780M+, and $80M fund management expertise to run troubled companies, serve on boards, advise company boards, litigators, institutional and private equity investors, and raise capital. John is Chairman of Strategic Management Partners, Inc. (410-263-9100, www.StrategicMgtPartners.com
) in Annapolis, Maryland. John is inducted into the Turnaround Management, Restructuring, and Distressed Investing Industry Hall Of Fame
, Past Chairman
of the Turnaround Management Association (TMA), and Chairman
of the Association of Interim Executives (AIE)
. John is 2012 winner of Corporate Intl Magazine Global Award for Corporate Recovery Specialist of the Year. Firm: Strategic Management Partners, Inc. (www.StrategicMgtPartners.com 410-263-9100)
is a turnaround management firm specializing in interim management and executive CEO leadership, asset and investment recovery, corporate renewal governance, board and private equity advisory, raising capital, and investing in distressed underperforming troubled companies. The firm has been advisor to Presidents Bush (41 & 43), Clinton, Reagan, and Yeltsin, World Bank, EBRD, Company Boards, and Equity Capital Investors on leadership, governance, turnaround management and equity investing. SMP is celebrating 25 years of service to its clients. SMP was named Maryland's Small Business of the Year, and received the Governor's Citation, Governor Martin J. O'Malley, The State of Maryland
as a special tribute to honor work in the areas of turning around troubled companies and saving jobs in Maryland. Turnarounds & Workouts Magazine twice named SMP among the 'Top Outstanding Turnaround Management Firms'
. American Business Journals named SMP among the Most Active Turnaround Management and Consulting Firms
in Baltimore, Washington, and the Mid-Atlantic Region. Global M&A Network Turnaround Atlas Awards named SMP as Boutique Turnaround Consulting Firm of the Year
. SMP is 2012 winner of Corporate Intl Magazine Global Award for Interim Management Specialist Firm of the Year. Strategic Management Partners, Inc.
: turnaround managers ready to run troubled companies, recover assets from investments gone bad, advise boards of directors and investors on company viability in distressed situations, and raise funding. We provide strong interim and operational leadership, strategic planning, financial, defense conversion, sales and marketing acumen developed building organizations in large and small companies, including President of public & private middle-market companies providing solutions to Commercial, Federal, International markets. Enterprises range from start-up to $250+mil. Industry expertise: Manufacturing; Job Shop; Engineering Services; Defense Electronics; Aerospace; Federal Government Contracting; Systems Integration; High-Tech; Computer Processing/Services/Software/Integration; Communications; Finance; Marine Services; Real Estate Development; Construction; Fabrication; and Printing. Publication: Mandate Pipeline
an Investment Management publication of Source Media.
End ### Reference: www.StrategicMgtPartners.com Turnaround Managers www.StrategistLibrary.com
or Strategic Management Partners, Inc. Library Benefits of Interim Management Managing Turnarounds in Times of Crisis Is Your Company in Trouble? Published by Corporate Board Magazine Collard on NewsReleaseWire Social Media: John M. Collard on Facebook at http://www.facebook.com/JohnMCollard John M. Collard on LinkedIn at http://www.linkedin.com/in/JohnMCollard John M. Collard on Twitter at http://twitter.com/JohnCollard Firm: www.StrategicMgtPartners.com Turnaround and Interim Management Experts
John M. Collard
Strategic Management Partners, Inc.