Reinventing Ourselves and Our Profession in 2011

If you are a turnaround practitioner, it is easy to be anxious these days. We hear that the economy is steadily picking up steam despite the continuing challenges of persistent high unemployment, political infighting that leads to regulatory uncertainty for many industries and the black hole of risk that remains in real estate.

Everyday we see new financing deals that serve as more evidence that the “Great Wall of Maturity” is being pushed out further into 2013, 2014 and beyond. Default rates are expected to remain below historical averages at least until 2012.

The number of bankruptcy filings and the duration of cases filed have both steadily declined. In fact, the Chapter 11 process itself seemingly has been converted from a judicially monitored means of effecting a business reorganization to an administrative procedure for courts to bless or enforce a pre-negotiated balance sheet restructuring deal.

As a result, turnaround professionals, like those in so many other industries significantly affected by the economic crisis, have had to adjust.

Practitioners and their firms have responded by adopting the mantle of “financial advisor” traditionally favored by investment banks and accounting firms. In this capacity turnaround practitioners perform assessments, review business plans, or provide expert testimony. However, this type of work tends to be shorter duration, less-fee intensive work particularly when compared to the success fees garnered by investment banks involved.

Those of us who have been in the business for a while have been through these cycles before. Using transactions to extend maturities or restructure debt does not fix poor management or other underlying problems faced by troubled companies. Eventually, the issues will have to be addressed, now or perhaps in 2014 when a number of companies will be standing in front of the Great Wall.

In the meantime, turnaround practitioners will do as they have done in past cycles…reinvent themselves.

They will add capabilities or specialties. They will, accurately, point out that the tools of “corporate renewal” are important for companies regardless of where they stand in the company lifecycle. They will continue to grow their businesses outside of North America as evidenced by the rapid growth TMA has seen in its international membership.

There is hope and there are opportunities out there for turnaround professionals. But we can’t keep waiting for the economy to improve and pick up the pace. All signs indicate our path to recovery will continue to be slow and arduous. We need to take matters into our own hands in 2011 and adjust our practices to face today’s realities.