In November, Land Securities and British Land, high street landlords to Blacks Leisure, backed the struggling retailer’s rescue plan by voting to accept a CVA. This corporate restructuring tool is not widely used, yet more than 97% of Blacks’ creditors agreed to the proposal, a move that prevented the leisure retail group from going into administration and saved thousands of jobs.

Industry experts say the arrangement will accelerate the group’s turnaround strategy, allowing it to close down 101 loss-making stores in order to focus on its core business.

In cases where a CVA is utilised, which requires approval by at least 75% of creditors, businesses burdened with debt can continue to trade and pay creditors a proportion of what is owed to them out of future profits. Typically, a business will pay a fixed monthly sum into the arrangement for a period of three to five years, monies that are subsequently distributed to creditors. This can be an attractive proposition for creditors if the alternative is liquidation, where they stand to receive virtually no recovery on their debts.

In certain circumstances whilst the proposal is being formulated, a moratorium can be put in place that prevents creditors from bringing proceedings against the insolvent company. A licensed insolvency practitioner will assist with the proposal and, once approved by creditors, will oversee its implementation.

CVAs have not been widely used since their introduction in 1986, and historically have had a high failure rate.  But last year a number of successful high profile cases, such as retailers JJB Sports and Discover Leisure have demonstrated that they offer a genuine alternative to the administration process.

CVAs offer a number of advantages over other formal processes: 

• They are flexible and can be tailored to the specific circumstances of the company
• They enable owner-managers to retain control of their businesses
• The business is able to emerge from the process intact
• They are transparent and inclusive
• Creditors can approve or reject the proposals, or put forward amendments.

The Government is currently considering legislative changes to the procedure to further encourage corporate rescue. These proposals include the expansion of the moratorium process and giving super-priority to lenders to promote the availability of rescue finance to companies in CVAs. 

In light of these changes, it is likely that CVAs will become more popular with troubled businesses of all types in the year ahead.

For more guidance on debt restructuring, contact Andrew Duncan at Bridge Business Recovery, an owner-managed firm specialising in business reviews, corporate restructuring, funding and insolvency, on 0207 025 6130.

It’s hardly surprising that the phenomenal growth in invoice finance for businesses of all sizes over the past ten to fifteen years has correlated with a simultaneous rise in the incidence of fraud against invoice finance companies.

As someone who has worked in the insolvency profession for over twenty years, I have seen varying degrees of this type of fraud – from the finance director who raises early invoices to ease cashflow, to the director who deliberately presents a bogus ledger as part of a longer term plan to run off into the sunset with an embezzled fortune.

In my experience those that do try to run don’t get very far but by the time they are caught there’s every possibility that they do a lot of damage to the position and security of the lender.

Although there are no reliable figures available, it is suggested that the receivables industry in the UK alone loses in excess of £50 million per annum in fraud related incidences.

However, despite the rise in this type of fraud, most directors act responsibly and honestly and have no intentions of defrauding others. But to play it safe, what can those who work in the invoice finance industry do to reduce the risk of being exposed to this kind of fraud?  Here are some tips on prevention.

Desperate times – Desperate measures

Companies trying to avoid insolvency will go to extreme lengths, including banking debtor receipts into the general bank account and producing misleading management accounts.  Often no accounts will be available, so insist on receiving current financial information, which should highlight any looming cash crisis.

Beware the habitual entertainer or high roller

Despite the lure of lavish lunches alarm bells should begin to sound when the company is a regular entertainer and host to very showy social events.  Whilst it’s fair to expect an element of this from those clients wishing to renegotiate better terms or, at year-ends, one should be mindful of those regularly splashing the cash.

The director who takes frequent holidays in the Caribbean or renews his Porsche every six months is an obvious candidate to watch out for.  It could just be that he or she is funding their extravagant lifestyle at your expense.

Everything going too well

Of course there are many successful companies but do not take it on face value; visit the company and insist on appointments being kept.

In order to minimise risks, be mindful of the following:

Opt for careful client selection

New business is not always good business and receivables financing is no different in this respect.

Due to the large level of funds advanced there is the definite need to conduct background searches into the past and present directorships of the prospective management, stakeholders and guarantors.  As always, the best advice is “know your client”.  Obtain copies of CV’s for those that work in the accounts department.  Also, do not discount the value of face-to-face meetings with the key stakeholders.

Regular and thorough audits

Use trained and qualified staff to carry out field visits to the company.  Do not allow appointments to be continually cancelled and by inference those clients that cause greatest concern should have the more frequent and thorough audits.

Be wary of possible collusion with a customer.  A detailed analysis should be carried out on the ledger, principally focusing on the main ten to fifteen customers.  It’s worth finding out if any of the customers are connected.

On completion of the audits ensure that the results are quickly communicated to the client in order that and subsequent actions can be implemented quickly where necessary.  If an audit result gives cause for concern it may be at this stage that the client manager will seek the advice of a third party, say, an investigative or forensic accountant to confound or alleviate any fears.

Monitor key financial indicators

Undoubtedly many invoice discounters operate sophisticated internal management systems to assess their clients’ financial wellbeing and highlight risk.  The most common of these indicators are as follows

• Unusual sales patterns
  A good example of this is where a client has a seasonal business.  It’s a good idea to ask the client questions if they suddenly start to notify you of an upturn in sales, out of season.
• Increasing turnover
  This is often the trademark of those clients generating ‘fresh air’ invoices, duplicating invoices and / or early notification of invoicing.  It is often the case that a company will notify the invoice discounter of an increase in turnover as it finds itself generating more bogus invoices in order to repay its debts and cover its tracks.
• Increasing debt turn
  A reduction in debtor days would indicate that the fraudster is trying to cover their tracks, often by paying ‘fresh air’ invoices with further ‘fresh air’ invoices.
• Increased number of credit notes Often those that generate fictitious invoices will subsequently raise credit notes in order to prevent the discounter from chasing the debt.
• Decreasing number of credit notes
  As opposed to those clients generating a sharp upturn in credit notes, those clients generating few or indeed no credit notes should equally concern invoice discounters.  Clients who do not produce debit notes, or do not notify the invoice discounter may be trying to deceive them in order to maximise their funding availability.

It is important for all businesses to tackle fraud.  Prevention and detection of fraud is key but in order to do this knowledge of the types of fraud that exist is necessary.  Fraud prevention should be proactive not just after a big loss when it is too late.  Recent research indicates that 50% of all trading companies were defrauded to some extent last year.

You have been warned! If you do need some assistance, please feel free to contact MCR who have recently recruited Graham Edwards and Victoria Butler to spearhead their forensic investigative work.

Article contributed by Paul Clark, Partner of MCR

Economists and politicians may talk positively about ‘green shoots of recovery’ but the latest analysis from PricewaterhouseCoopers (PwC) shows the downturn is showing ‘no signs of abating’ with 5,483 firms becoming insolvent in the first quarter of 2009, up 57% on the same period last year.

Businesses going into some form of insolvency are very much a reality of today’s Britain. And while Insolvency Practitioners are duty bound to realise the assets of a company and distribute them in accordance with the law, this still leaves unsecured creditors at the back of the queue, often receiving little or no recovery on their debts.

However, rather than sit waiting around for a meagre dividend from a liquidation process, there are positive steps you can advise your customers to take to protect themselves against bad debts.

Much will depend on the nature of the terms and conditions of trade: make sure these incorporate a robust retention of title clause and remember that they will always be easier to enforce if there is an explicit acknowledgement of them by the debtor. Any new customer should be required to sign and date a copy of the terms and conditions, before agreeing to do business with them and commence supplying goods or services. While a new customer can equal more profits for a firm, it can also spell disaster if they turn out to be a poor credit risk.

Companies should also consider what credit limit is realistic, and stick to it.  If they are dealing with a new or unknown customer, they should always get a report from a credit agency. Another approach is to request a deposit or even stage payments.  If there’s doubt about payment, they should consider obtaining a guarantee from a parent company, if applicable.

Other techniques include a requirement that contract funds be protected by use of a trust account. Additionally, it may be possible to negotiate step in rights, particularly if they’re a stakeholder in on a project involving sub-contractors.

A robust credit control function is also essential; all debts must be collected on time, any issues should be dealt with immediately and if payment is not forthcoming, tell clients not be afraid to withdraw services. They should also monitor payment performance closely and follow up if promises are not kept.

If a customer is facing financial difficulty, and your client has already obtained a judgement against a debtor they may be able to seize goods in lieu of the debt due, prior to a formal insolvency.

And if they are supplying a service or goods to a business which goes into an insolvency process, the Insolvency Practitioner may need to enhance the realisations into the estate and it may be possible to contract directly with them to continue services or complete a specific task and so reduce potential losses.

Of course, the most obvious solution is simply not to allow any business to become so exposed to a single trading partner that their failure could threaten the future security of your client’s enterprise.  Sadly, with insolvencies at record levels, this problem is becoming far harder to avoid than ever before.

Submitted by Andrew Duncan - Partner, Bridge Recovery

andrew.duncan@bridgebr.co.uk

The views contained in this article are solely those of the author and do not necessarily represent the views of the Commercial Finance People

Creditors of Silver Leaf Capital Partners LLC, the first corporate failure of a CRO Registered Limited Liability Company in Qatar since the establishment of the QFCA in 2005, have appointed Jo Rolls and Steve Parker of Tenon Recovery as joint liquidators.

Silver Leaf was incorporated as an investment vehicle and has secured an initial tranche of capital to cover set-up fees, professional and regulation fees in addition to marketing costs associated with seeking investors.

A meeting of creditors was advertised both in the UK and Qatar and, since information provided showed the majority of creditors were based in the UK, it was held in London on 7th July. All participants were offered the option of attendance in person or by phone.

Following their appointment, Jo and Steve will conduct detailed investigations into the past trading of the company.

Carl Jackson, National Head of Tenon Recovery, said:

“This appointment further demonstrates our ability to handle innovative cross border restructuring and recovery cases.  We have previously completed the first Centre of Main Interest (COMI) deal conducted in the UK.”

About Tenon Recovery
Tenon Recovery is the third largest corporate appointment taker in the UK.  Specialising in turnaround, recovery, restructuring and insolvency in both the corporate and personal sectors, Tenon Recovery is led by 43 directors supported by 350 staff operating from a network of 30 offices across the UK.  Tenon Recovery has strong relationships with secured lenders, both banks and asset-based lenders.  Tenon Debt Solutions assists over 3,000 individuals suffering from sever debt problems – see www.tenondebtsolutions.co.uk

Image: http://www.worldatlas.com/webimage/countrys/asia/qa.htm

Andrew Duncan of Bridge Business Recovery LLP reports that with statistics suggesting the number of companies going into liquidation is up 56% in the first quarter of 2009, insolvency is an issue that hangs heavily over many businesses in today’s gloomy economic environment. But ignoring it’s potential presence won’t make it any less real and, according to Andrew Duncan, Partner at Bridge Business Recovery LLP, we ignore the “I” word at our peril. 

Here, he lists the early warning signs that may indicate the onset of problems that, if left unaddressed, could lead to insolvency.

Financial Clues:

·         Bank overdraft consistently at or above its limit

·         Bank requesting additional security or personal guarantees – or reducing the overdraft facility

·         The business using Crown funds for working capital through non-payment of PAYE or VAT

·         Creditor and/or debtor days are increasing

·         Creditors supplying goods and services on a pro forma basis

·         Creditors sending warning letters or beginning legal action

·         Number of customers declining

·         Late filing of accounts or annual return

Management Clues:

·         Management is:

o        Constantly fire fighting

o        Not producing or interpreting management accounting information

o        Lacking a current year budget, accounting and internal controls

o        Avoiding tackling core issues

o        Lacking a strategic plan

o        Taking disproportionate levels of remuneration

o        Constantly arguing

·         There’s a high turnover of staff and the team is demoralised

Detecting problems using a check list such as this can be relatively straight forward; but appreciating the underlying causes can be more complex.  Of course, just because a business demonstrates one – or even several – of these symptoms, it doesn’t necessarily mean that insolvency is the diagnosis.  Businesses don’t generally become insolvent overnight and the early detection of the symptoms of failure could make the difference between resolving short term issues and having to deal with fundamental problems that may result in insolvency.  A frank assessment of the problems is essential in deciding whether or not the business is viable in the long term.

That’s why it’s also important to work with skilled experts like the team at Bridge Business Recovery when deciding what action to take. We specialise in finding ways to help shareholders, lenders and management preserve their stakes in a troubled business and, wherever possible, put it back on a viable footing.  This might mean taking advantage of our established relationships with a wide range of funding partners or our integrated restructuring support.  If, however, the problems are deeper rooted and a formal insolvency process is the answer, our team is here to guide you through the process.

The message is clear:  in today’s environment, it’s dangerous to ignore the possibility of insolvency.  It’s a fact of life in the current market and professionals should not be afraid to address the issue with their clients.  The earlier a problem is identified, the more options there will be available to preserve the value of a business and its reassuring to know that expert help is on hand.

For more information about how Bridge Business Recovery can help, contact Andrew Duncan on 0207 025 6130. www.bridgebr.co.uk

And, if so, when?
Ask any seasoned Interim or Turnaround Manager why distress is painful:  simply put, there’s a huge amount to do, inadequate and/or insufficient resources and time available, and frequently people are focused on doing things that are not top priority.  Early challenges include:  getting a clear understanding of the situation;  managing customer and supplier expectations;  understanding how long things have been deteriorating;  discovering what has prompted action now;  and gently challenging assumptions in the brief!

Probe deeper and ask why things don’t always go smoothly once the agenda is set.  Even then, denial, prevarication or obstruction by or between the stakeholders can easily constrain the speed with which the turnaround can be started, let alone executed … … and that assumes that taking modest risks is not restricted by an urgent need to operate within tight banking covenants and closely-monitored headroom. 

This results in more pain
Given a situation with many of these factors, the number of issues compounds; and, unless they have had prior experience of a distressed situation, few stakeholders understand how rapidly deterioration can accelerate with the passage of time.

As a company’s fortunes begin to decline, so do performance drivers: typically morale worsens, staff and management turnover increases, customer service levels decrease, operational issues emerge, levels of profitability become unacceptable, cash becomes scarce and working capital requirements increase.  In severe cases, products may become uncompetitive or obsolete due to lack of investment, key customers and contracts may be lost, and key suppliers may withhold supplies, or move swiftly from standard payment terms to cash-with-order.  Cash flow starts to run the business, confidence levels are shaken and relationships with creditors and backers alike can become adversarial.

Unless assertive, operational action is taken very quickly, reinforced by solid financial backing, control of the business may well be wrested away from the directors and the value of returns to the stakeholders will decline rapidly. 

…and here’s an example:

A private-equity-backed national wholesaler had failed to deliver the expected synergies from a recent merger.  A new CEO was appointed to stabilise and regenerate the business and an Interim CFO was recruited, initially for a 3-6 month period.

• First priorities:  close the accounts for the previous year, introduce cash forecasting and management disciplines, and provide support to accountants performing an Independent Business Review.
• During the first 3 months, the CFO uncovered a £2.7m black hole in net current assets, an undisclosed long-term liability of about £20m and significant record integrity issues.  Furthermore, his assessment of the break-up value of the business showed that the positions of the stakeholders were under water.
• A new business plan was prepared which won an injection of fresh equity, and the backing of the lenders conditional upon improved cash forecasting and strict adherence to facility headroom limits. 
• A second refinancing round further strengthened the balance sheet.  However, this was insufficient to prevent credit insurers withdrawing cover from the group.  The CFO subsequently negotiated self-insured trade terms with leading suppliers in order to ensure orderly trading continued.

The final outcome was highly successful, but the Interim CFO’s assignment, along with a return to profitable trading, had taken 25 months.

A less painful approach to distress
If you think you’re doing everything right, but the numbers don’t reflect that, go back to basics.  Double-check all operational and financial statistics and their interdependence.

If the numbers are still not right, or if things are starting to go badly wrong, why not bring in a Turnaround Manager or an Interim to help stabilise the situation?  As with any walk of life, there are times when it pays to seek out specialist help from someone whose training and experience equips them to work well in a specific field: they will almost always outperform those for whom this is uncharted territory.

…which is helped by…
Interims and Turnaround Managers have the added advantage of not being wed to any of the historical mental frames that inhabit most businesses.  Their focus is on a successful outcome for the company or the stakeholders, so they are not necessarily bound to existing strategies or emotional ties.  They are often able to ask pertinent questions based on their experience which may help to identify disconnects between the activity and the reported data.

…and here’s an example:
The MD of an online retailer saw a significant reduction in sales volumes.  He identified threats to profitability and liquidity.  Had the trend continued the business would have been at risk, so he approached a Turnaround Practitioner.

Together, their analysis of the business showed the product range had been extended too far, contributing to cash flow difficulties and depressing profit margins. 

Product lines were rationalised in order to remove unprofitable or slow-moving items.  More realistic assessments of future business were made and headcount was adjusted.  Only one round of redundancies was necessary, helping the company get into recovery mode more quickly and reducing uncertainty amongst employees.  A more responsive and cost-effective automated web platform was introduced and advertising agreements were improved.  Improved planning reduced inventory and eased the cash situation, whilst further strategic and tactical improvements were also implemented.

This allowed the business to trade profitably and positioned it well to capture market share when the economy rebounds.

Spot the difference!
In both cases above, difficulties were successfully overcome.  However in the second example, management took proactive steps to deal with a situation before it started losing control, and the turnaround in performance was more structured and far-reaching.  Because the business was proactive in its attitude all effort was spent on improvement, rather than on overcoming inertia or denial.

Lessons to remember
What you see in the numbers may not always reflect reality.   There is merit in having an experienced eye look over the financial reporting process, and in particular marrying short-term cash forecasts with medium-term sales and margin ambitions.

Turnaround specialists tend to have well-honed antennae which help them identify the true root-causes of a firm’s difficulties, and they bring broad experience, objectivity, lateral thinking, common sense, the courage to speak their mind and a willingness to act on their own initiative.  Their skill is knowing what is going to make the most impact . . . then getting on with it.

It takes courage for an executive board to call for help from an external source – - sometimes they need to be prompted to do so by other stakeholders – - but the earlier that operational and financial difficulties are recognised and an Interim or Turnaround Manager is engaged, the better are the chances of survival.

David Graham is a Partner in RiVO Partners LLP, which specialises in turnaround & performance improvement for mid-market companies. 
Mobile: +44 (0)7887 757178

www.rivopartners.com

The JCB Tough Phone made headlines last year as gadget reviewers lined up to put its “indestructible” tag to the test. In the name of science the phones were dropped, pummelled, battered and crushed – and emerged still working. What many people reading those reviews didn’t realise is that the Silicon Valley-based company behind the phones, Sonim, had been through a similar ordeal. 

‘We became the pariah of the industry,’ says Bob Plaschke, Sonim’s CEO. ‘We spent millions of dollars [of investors’ money] chasing a grand vision that wasn’t grounded in solving real people’s problems.’ 

The vision was internet telephony (VoIP) over mobile phones; a prospect that excited Sonim’s venture capital (VC) investors so much they invested $47 million (£34 million) before the company had made a sale. Sonim won awards and contracts, but critically, failed to deliver working software on time to the mobile operators it had signed up. The hype quickly turned to derision, and with a burn rate of $1.8 million a month, it was only a matter of time before Sonim ran out of cash with ‘no chance of any viable funding after that’. 

It’s a position many entrepreneurs will be familiar with, though Sonim’s journey from stardom to near-bankruptcy will be faster than most. Jamie Constable, CEO of turnaround investment firm RCapital (which now owns Little Chef) says there’s ‘a very steady flow of companies getting themselves into serious financial trouble’. Survival in this environment depends ‘not on how well run you are, but on how you’re structured financially’.

Limited options 

The Art Group, which supplies touch screen kiosks enabling visitors to art galleries to print off their favourite works, is a case in point. RCapital got involved with the business last year after its VC backer decided not to invest further.

There was an added irony as the backer had already replaced the old management team and agreed in principle to a fresh injection of funds.

‘The company’s only choice was to go to the bank for the money, and of course, if the VCs won’t do it, the bank won’t do it,’ says Constable. ‘The business had already put in place the operational changes it needed to return to profitability; it was just a case of [repairing] the balance sheet.’ RCapital bought the company for £2.5 million and made the changes needed to get it back on track. 

Deeper cuts

For investors like Constable, it’s essential to distinguish between good businesses that are simply running out of cash, such as The Art Group, and those with more fundamental issues. When Rob Woodward took over Scotland’s ITV franchise STV in 2007, he knew it was in serious financial difficulties: its market cap had shrunk from £2.1 billion in 2001 to less than £200 million that year, partly the result of an unsuccessful expansion strategy. Now he admits that he underestimated the scale of the problem.

‘We informed the City upfront of the reality of the situation, and it was far worse than anyone had expected,’ says the CEO. ‘All the good news had been drained from the company: the plans were far too optimistic. So the starting point was very different to what we had anticipated, though the endgame remained the same.’

When Woodward took over, STV’s board resigned en masse, leaving him free to pursue his threefold strategy of rectifying the ‘challenged’ balance sheet, reducing costs by 
refocusing on STV’s core business, and investing in new areas he believes have growth potential.

Though the company’s share price is still in the doldrums, Woodward has transformed losses of £23 million in 2007 to pre-tax profits of £14 million, reduced net debt from £47 million to £36 million, and returned £30 million to shareholders (after a rights issue raising £92 million in December 2007).

The most difficult aspect of the process, he says, was ‘delivering the message of huge cost reductions and at the same time investment in future growth opportunities’. Some 120 staff were made redundant, while a ‘new team’ was brought in to grow STV’s online presence. 

Strategic thinking

Woodward’s point is instructive. Few turnarounds can be achieved without an injection of cash, and cutting costs is another common theme. But simply paring a business down and pumping it with money could be flogging a dead horse unless there is a fresh approach to go with it.

For Plaschke, whose role at Sonim changed from CFO to CEO after the company went into crisis mode, the first priority was survival. By cutting the company’s head count from 180 to 15, its monthly burn rate was reduced from $1.8 million to $500,000. But Sonim still had no way of making money.

Plaschke began in-depth research into potential markets, leading him away from the idea of selling generic software to mobile operators towards producing a ‘ruggedised cell phone’ aimed at blue-collar workers. It’s a fascinating story with its own ups and downs: Plaschke secured another $10 million from his investors, but battled long and hard to find a distribution channel for the phones, eventually striking lucky in Sweden. But the essential point is that Plaschke had completely changed tack.

‘The board found a presentation I’d given to them before, and there was one slide that listed “12 reasons we’ll never become a cell phone company”,’ Plaschke relates. ‘Well I still believe in six of the 12, but I’ve disproved the other six. It was a choice between shutting the company down and firing all the employees, or selling more phones.’

The decision to sell more phones resulted in sales of $31 million last year (which Plaschke expects to increase to more than $40 million this year). With just three salespeople, Sonim distributes its phones in 42 countries and is now at break-even.

Out with the old

Sometimes turnarounds are more about a fresh approach than a complete change of direction. Richard Brighton, MD of electronics manufacturer Exception EMS, was hired to turn round a company that was ‘going through a degree of stagnation, always making around £17 million, always chasing sales to make up for the customers it had lost, always at a break-even level’.

When Brighton first walked into the company, he saw a sea of green printed circuit boards covering every available surface. Looking into how it was run, he found it ‘chaotic and disorganised’: the manufacturing process was ‘a collection of fiefdoms’ and there was ‘a lot of work in progress’ with no one taking responsibility for it. Underlying these problems was the autocratic management style of the previous MD, who had been ‘asked to leave’.

‘One of the first meetings I had with management, I asked people for their thoughts and it was like tumbleweed. It was so obvious they had never been asked that kind of question before,’ Brighton reveals.

The changes were radical, but they were operational rather than strategic. Brighton created five ‘mini-MDs’, each of whom was given responsibility for a number of customers. Work for each customer was to be managed in a separate, U-shaped area, so that progress was clearly visible. There were management changes too, and a reduction in head count, from 250 to 210, achieved mainly without redundancies.

The result was that turnover increased from £17.5 million in 2007 to £20 million 
in 2008, with an operating loss of £500,000 transformed to a profit of £1.1 million. Most notably, that was achieved by gaining only one major new customer and simply serving the others better so the company won more work and, in some cases, could justify raising prices which had not been adjusted in years.

In a similar vein, RCapital’s Constable states that Little Chef’s problems boiled down to the fact that outlet managers had no sense of accountability, and staff were demoralised. ‘It was about giving ownership back to the people running the restaurants; we improved the food but kept prices the same, and told managers that if they made excess 
profits they’d be rewarded.’

Deep breath

Viewed with hindsight, the solutions to a company’s problems may look obvious. But when you’re at your lowest ebb, those troubles can seem insurmountable. Plaschke, an ex-employee of consultancy firm McKinsey, says that if he had applied the principles he learned there to Sonim, there would have been no option but to liquidate the company as quickly as possible.

‘There are lots of folks who told me to shut [Sonim] down and get another job,’ he recalls. ‘And if you looked at the business in any rational way, I should have done just that. But entrepreneurs defy logic. At times like these, you’ve got to trust your gut conviction and follow it, even if it leads to failure.’

Business Recovery Terms 

DIY turnarounds

Cutting costs, accepting low profitability and focusing on retention of customers may work in the short term, but often you’ll need to look further ahead and consider more radical changes to your business, writes Malcolm Prowle, a professor at Nottingham Business School. 

Restructuring

Think big, like a revision of product specification, a change of location or a different distribution method. Or withdraw from your current line of business entirely and invest in an alternative more suited to the times.

Working partnerships

Economies of scale can be achieved as businesses pool resources such as buildings, equipment, specialist staff and back office functions. New products can be developed on the back of the companies’ combined expertise.

Mergers

A business may not constitute a viable independent entity in the long term. If other companies are in the same position, a merger may be the most feasible option, minimising competition and increasing market share. 

Contributed by Growth Business:   

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The website is brought to you by Vitesse Media plc, itself a fast-growing media company quoted on the AIM market of the London Stock Exchange.

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“There has always been a residual level of corporate failure but the current market is scary – it’s difficult to know what kind of staffing levels to implement,” he said. “We are drafting people in from the property finance and private equity departments, so there is a place for adaptable corporate finance staff, but the resourcing side could become an issue.” Phil Duffy, partner at corporate restructuring firm MCR, said the market was the busiest he had seen in 20 years.

Contributed by:  Insider Daily: Business news from the North West, 10^th March 2009  www.insidermedia.com

TMA (UK) in association with Minerva Training Associates has announced a series of four seminars entitled Fundamentals in Turnaround Management to be held throughout March at leading business school venues in London, Manchester, Leeds, and Birmingham.

The seminars are aimed at professionals in corporate roles or private equity, accountants and lawyers either in practice or industry, bank workout and support teams, owner managers and interim managers at CEO, CFO and COO level, and workforce recruitment and planning specialists. Sessions on diagnosing core performance issues, planning a turnaround strategy and identifying corporate value, and applying the essential components of a successful turnaround will be led by senior TMA personnel including Conference Director Dominic Reimbold and Membership Director David Hole.

“This recession is going to be long and deep, and if the country is to come out of it with its economic base intact then the sort of skills businesses need to defend and recover their core corporate value urgently need to be disseminated as widely as possible,” said Mr Hole.

“Turnaround professionals today face two major challenges: more and more businesses will need their services, while the shortage of business credit will make individual turnarounds ahead of insolvency even more demanding. Our seminars can imbue both professionals and businesses with the practical, hard-headed skills they will need to make and implement the right decisions to enable them to go forward with confidence even in the toughest of times.”

* The price of attendance at the seminars includes a year’s membership of TMA (UK). Full details of dates, venues, sessions, speakers and making a booking online are available at:

www.tma-uk.org

Further information:

David Hole, Alexander Business Consulting – 07976 758246 – davidhole@alexanderbc.com

Dominic Reimbold, Global Talent Implementation – 07881 750467 – dreimbold@googlemail.com

Alan Jennions, 36 has joined from Naismiths’ Leeds office to head up DBK’s new Construction Insolvency, Recovery and Risk Management team, which will work with small local businesses to large national contractors and developers. He will be working across DBK’s national network of six offices, comprising a total of 125 staff, including 50 chartered and senior surveyors. In Birmingham, where DBK is headquartered, an alliance has also been formed with Lucas Wilkes Limited – an established property and construction advisor with specialist skills in risk and value management services.   

Duncan Berry, principal director of DBK comments: “The people who currently have the lion’s share of the construction insolvency market were at the height of their careers during the last recession. Not only has the market changed in the past 15 years, but this recession is markedly different from the last. 

“We have scoured the country to find the right person to head up our Construction Insolvency, Recovery and Risk Management team and work with 50 of our chartered and senior surveyors. Alan Jennions has close to 20 years experience as a construction insolvency consultant and his approach is exactly in line with our business. It is very sad to think of the significant number of construction and development companies that may be declared insolvent over the next 12 – 18 months, but we are perfectly placed to work with these businesses and salvage all that we can.” 

As well as marketing the new service to insolvency practitioners and funders, DBK is also offering ‘health checks’ and contract reviews to developers and contractors. Whilst fund monitoring is one of the existing services DBK provides to banks and other financial institutions, the implications of being in a finance and property-led recession mean that developers and contractors need to formally indentify and manage their own risks, working alongside debt providers and the wider development team.       

In circumstances where insolvency cannot be avoided by insolvency practitioners, funders and creditors look to seek comfort in the fact that the assets of the failed company should be protected. In the majority of cases within the construction industry, the principal assets – and very often the only assets – are the company’s contracts. Reviewing, valuing and managing these contracts within a very short space of time is crucial to maximising recoveries during the insolvency process. 

Alan Jennions, head of DBK’s Construction Insolvency, Recovery and Risk Management team comments: “2009 is going to be a very turbulent year for the development and construction industry, but it’s my aim that the new insolvency team at DBK will be working right in the thick of it. The team’s extensive experience in fund monitoring, project management and valuations means that we are perfectly placed to become a leading national player in construction insolvency work. 

“We believe our main competitors are not truly national in geographical terms, so with a large professional team, offices across England and Wales and a strong reputation in the cost consultancy market, we are very optimistic about the amount of instructions that could come our way.” 

Duncan Berry concluded: “The alliance between DBK and Birmingham-based Lucas Wilkes creates an ideal blend of both core and specialist skills. This skills base, combined with DBK’s national resource levels and infrastructure has created a very strong and dynamic construction insolvency team.” 

DBK has extensive experience across mixed-use, commercial, residential, health and education sectors. The company has offices in Birmingham, London, Bournemouth, Manchester, Leeds and Ipswich with core services being project management and cost consultancy for a wide range of property development sectors. In addition, DBK also acts as the employer’s agent/client representative, provides fund monitoring services, health & safety/CDM Coordination, section 106 negotiations, building surveying, BREEAM rating and Eco Homes assessment, and utility cost management.