◗;Yield information that is valuable in
the preparation of other reports.
◗;Provide useful information concern-
ing the quality and capability of
Given the nature of the environ-
ment, time optimization and having a
procedure to evaluate information and
ensure its veracity are necessary. Time
and money are equal. The first step is
to establish reliable cash reports and
projections (See “Cash Management in
Distressed Organizations,” The Journal of
Corporate Renewal, Sept/Oct 2009).
Reconstruct the balance sheet with a
critical eye, and independently verify the
data collected. The following steps will
result in an accurate view of assets and
At the conclusion of this process, the
viability of the firm will have become obvious and the core products that possess
positive margins will reveal themselves. A
reconstituted balance sheet with realistic
values and true liability balances will provide a path for financing or raising cash
from divestiture. It will also be necessary
to support either statutory or nonstatutory debt restructuring. In aggregate, due
diligence will provide a comprehensive
and accurate notion about how the
company will perform in a new paradigm.
It will verify the quality and competence
of management, confirming whatever
changes are necessary.
Due diligence is a fact-finding mission or
investigative process. Distressed organizations need this process to address an
issue of fundamental importance to all
stakeholders: whether to liquidate the
organization or attempt a turnaround.
The parameters necessary for turnaround
success are core product, financial resources and competent management.
The organization in decline represents
a special challenge to the process of due
diligence. It is a harsh, extreme, ambigu-
ous and exigent environment. In this
setting, time is short and information
systems are likely impaired. This creates
difficulties in gathering and assessing
data. It is crucial to view all data with
◗;It establishes a meaningful notion
of potential performance in a new
◗;Using real asset values, it will provide a
path for financing or divestiture.
◗;It will provide information necessary for
statutory or nonstatutory restructuring.
◗;It will provide a wealth of information
concerning the organization, boosting
any recovery effort.
In aggregate this information will
answer the fundamental turnaround or
liquidate decision. It will also facilitate
execution of the chosen strategy. TSL
Tommy M. Onich CTP is the president of
TCMI Limited www.turnaroundinternational.
com and provides interim management
services to distressed organizations. He has
been practicing as a turnaround professional
in both the United States and Canada for over
14 years. Onich can be reached at tonich@