or some kind of transaction. So I think that’s
where the focus is going to be at our firm
and will continue to be, compared to the
slower traditional restructuring market.
I predict there will probably be continued pricing pressure for turnaround
consultants, especially on the debtor side,
which is where most of our work is focused.
Industry sectors with the largest potential
for restructurings include retail, shipping,
the coal industry, commercial construction
and spots within the healthcare industry.
ARDEN: Lawrence, I think you nailed the
future for the next 12 to 18 months, quite
candidly. We’re seeing much of the same
thing in the way of rates and continued
competition amongst the lenders. And I do
believe that many of the deals that are being financed and structured today are likely
setting up for turnaround clients 12, 18, 24
months from now if these companies hiccup at all. Lenders are adamant about not
losing the deal, and it goes beyond pricing
pressure because, with rates being as low
as they are, the deals really aren’t circling
around the pricing structure of the lenders.
Rather, the availability and liquidity being
provided by a new credit facility, coupled
with the covenant structure, seem to be the
defining terms on whether a new lender
will win a financing deal.
We’re seeing air balls being done again,
and stretch pieces with some level of
frequency. And I do believe that some of
these situations that we’re seeing being
refinanced likely will circle back as clients
to the folks participating in this roundtable
WIKEL: I’ve got to agree with both of those
comments, in that we do see those same
industries, we are also seeing those same
trends. Huron is selectively ramping, staff-
ing up and becoming much more active
in what we call the transaction advisory
service side and we’re seeing, again, lend-
ers and companies and private equity
firms a little more interested in what their
valuations are and looking for options and
alternatives. So we are seeing a little more
activity in terms of trying to figure out their
portfolio or what the value is of a particu-
lar portfolio company and when there is
a small “d” default or some type of small
credit trip, I am finding the lenders a little
curious about their borrowers and using
some of their credit capabilities, or what
their revolver language says, to allow them
to come in and do a business assessment.
And trying to get as educated as possible
about the management team and where
the company is going.
On the flipside, people coming into new
deals, I completely agree with Lawrence
and Mitch that I am just seeing an incredible
amount of liquidity chasing a finite number
of deals, and I am not seeing a lot of covenants, as well as some pretty low pricing.
FURMAN: We are seeing the same institutional conduct that everyone has mentioned. We are, however, already seeing an
increased case load at Getzler Henrich in
part because of our operational and process
improvement orientation. This may not be
reflective of the industry as a whole. We
do anticipate a further increase in activity
during 2015 related to the more aggressive
lending activities of the past 12 months and
ultimately the impact of increases in interest rates – when that eventually happens.
OCEJO: In this environment with excess
liquidity there seems to be emerging a
class of professionals who provide business lifecycle advisory services, but who
do not consider themselves traditional
turnaround professionals. Are these new
kids in town considered an ally or competition by the traditional turnaround firm?
Anyone have comments about this?
FURMAN: Strategic consulting isn’t competition if it’s provided to start-ups or mature
companies looking to understand and
develop industry opportunities. However,
if they are engaged in non- or under-per-forming situations where the underlying
problems are operational or financial, they
are clearly competition. They would also
likely not be the most appropriate professional for such turnarounds.
ARDEN: It’s interesting because this question actually strikes a chord relating to
a situation that I just wrapped up with a
client. I guess simply to answer the last part
of the question first: Are they competitors?
and private equity
firms a little more
interested in what
are and looking
for options and
They’re certainly trying to be competitors.
The problem that I just found, and others
in this roundtable may have had similar experiences, is that when you take somebody
who is focused on change management and
okay at some of the softer types of consulting, you refer to it as lifecycle advisory; they
are pitching themselves into turnaround
situations and sometimes getting in and
trying to do softer-type consulting in situations where harder, more rapid decisions
are required. By example, we were recently
brought into a $100 million trucking company. An advisor was in there for the previous four or five months, infiltrated himself
pretty well into the organization, but he
failed to recognize some of the early warning signals from the vendors and various
issues with customers, the things that those
of us that are turnaround practitioners
would recognize very, very quickly in client
situations. And, when you have folks that
are not as quick to recognize the signals,
you wind up in a downward spiral and lose
companies more rapidly.
In this particular situation, the “
consultant” was trying to preach the full circle…
“Let me get in early, I could help you do this,
I could help you do that, we’ll position the
company, we’ll get it sold,” and they failed to
recognize that as he was doing his soft stuff;
the company was eroding at such a rapid
pace that, by the time we got referred in,
despite six weeks of ‘round the clock effort,
we wound up throwing it into a Chapter 7
and calling it a day.
So, yes, they are competitors. I don’t
think they necessarily are going to be value-