A Port in the Storm

BWD Magazine, Spring 2012

Turnaround & Receivership offers help to troubled firms

Across the country and in Michigan in particular, the last few years have seen a tremendous number of businesses sailing into troubled waters. In fact, it has been described as an ocean of distress.

On these rough waters, we have seen businesses taking on water and in some cases even going under. Both the troubled businesses and their creditors often rely on turnaround firms to venture out into the troubled seas and provide help.

Charting troubled waters

In some cases, that help simply takes the form of increased transparency. When a turnaround firm is brought in, its mission is to provide reliable information about the state of affairs within the troubled business. Other times, rather than simply communicating direction from shore, the consultant is asked to go out to sea with the business owners and try to help steer the ship out of danger. In the most extreme situations, a team of professionals are called to take over the ship and stay with her as she goes down in as orderly a manner as possible, attempting to salvage as much as possible. It's often a case of simply making the best of an unfortunate situation.

In each of the circumstances described above, the experience of the organization chosen to navigate the waters, the breadth of its capabilities, the reach of its circle of influence and the knowledge of its associates are key factors determining its ability to help a troubled business. As consultants are considered and vetted, each of those areas is important. If an organization is too small, it may not have the number of qualified people available to be responsive.

If the types of skills and experiences are too narrow, they may not be able to address enough of the needs of a business. If the firm lacks geographic presence in a market, it often results in greatly increased costs as professionals need to secure travel and lodging. And most importantly, the experience of the chosen firm in these hard and stressful environments is essential so that consultants aren't learning on the creditor's dime.

Assembling the right crew

The key is to find a firm that has a depth of knowledge, a familiarity of the location and the manpower to address all the issues faced by the business in question. This point was illustrated recently in an engagement the Rehmann team was involved in. Rehmann was engaged to provide assistance in a wind-down and liquidation type proceeding. Because we had an office in the area, we were able to staff the engagement with local Rehmann professionals who had significant experience in the industry in which the company was involved.

As part of our process, we spoke with local people who shared information with us that wasn't consistent with many of the business records. Additionally, there had been legal proceedings in the past involving another consultant which resulted in certain information being entered into the court records. This was also inconsistent with what our local associates were being told.

We brought in Rehmann Corporate Investigative Services to further investigate. With minimal effort, their information technology specialists were able to find millions of dollars in transactions going back years. This important information had been missed during this court action some years ago. The consultant involved was reputable and experienced, but did not have the local resources or the access to the specialized professionals that Rehmann did.

Rehmann's Turnaround and Receivership group is unique in the industry because we offer in-house consultants from every area of expertise necessary to complete an engagement. Where other firms have to subcontract items like investigation and security, we are able to provide our clients that type of expertise. This not only makes for a more well-rounded engagement, it is a more cost- effective alternative.

Depth, breadth, reach and experience cannot be overestimated as essential elements of a turnaround consultant. These are the things that can truly make a difference as consultants try to help steer troubled businesses into safer waters, or in the worst cases, try to limit the loss as one of those ships go under.

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