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 If you have never had to consider hiring a turnaround executive up until now, then we can assume you must be doing something right. But in the current downturn, there are external factors that even the most seasoned private equity investors cannot tackle alone. It could be time to call in the capabilities of a lone wolf. That is why we have asked turnaround executive, Mark Taylor, to highlight the characteristics private equity investors should expect in not only him, but other turnaround directors from day one.
Great expectations: vital characteristics of a successful turnaround executive
Turnaround directors have specialist expertise in corporate rescue and can quickly be introduced into a troubled business. They will take on an executive role in a turnaround and/or work in an advisory/mentor capacity alongside, or independent of, a professional services firm advising management and key stakeholders.
Mark Taylor says that in his experience more times than not incumbent management teams lack the experience in turning around a business. That is why it is wise that the turnaround director takes an executive role, such as chairman, non-executive director, CEO, or chief restructuring officer, working in tandem with existing and second tier management or directly augmenting it, if required.
He describes turnaround directors as independent operators who will have a combination of both sector and situational experience, with the key differentiator being “proven and credentialed situational capability”.
“The common theme is that we have ‘done it before’, bringing our skill set rapidly and effectively to a stressed situation,” says Taylor. “Tough choices have to be taken - and if management leaves those choices too late they lose control of their own destiny. The three dimensional paradigm that needs to be identified and agreed upon is fix it and grow it, close it, or exit it; this could be a product line, customer relationship or a total business entity.”
Selection process
When selecting an appropriate turnaround director, he says there is often a conduit to this introduction, such as firms like PILOTpartners, who may already be acting in the role of trusted advisor. Having a track record to look back on will give firms a good idea of what a director ‘can do’, but almost as important is the style that they bring to complement existing management to ensure value is driven from day one of their introduction.
While turnaround directors have a duty of care to the company, which usually engages them, they are focused on maintaining strong relationships with all key stakeholders; very often it is these key financial stakeholders, who recognising there is a burning platform, have introduced them to management in the first place. Taylor says their ongoing support is pivotal to ensure a turnaround strategy is adopted and successfully implemented.
Increasingly, in today’s market, turnaround directors also have a role to play in improving a business’s longer term resilience, proactively to ensure it does not move into a distressed space in the medium term.
 Pollard Case Study
Mark Taylor was introduced to Pollard, a Midlands based automotive supply and services company, by PricewaterhouseCoopers to determine if there was an alternative strategy to avoid the threat of administration.
While the assignment included a new sector for Taylor, it was business as usual as he was being brought in not for his sector expertise, but rather his situational capability.
“My first course of action was to determine the cash and stakeholder position,” says Taylor.”Drastic changes had to be implemented to streamline the business. I devised a 90 day plan and proceeded with execution.”
What the company required was additional cash management support and initiating a forecasting capability around the existing functional financial role--identifying what was adding value and what was not.
To maximise cash and profit generation some major decisions had to be made, the toughest of which for the management, according to Taylor, was to exit manufacturing and to allow him in as CRO, in the first instance, and commit to a non-family leader quickly.
“I had to explain in clear terms the implications of the burning platform and what was required in terms of a way forward and supporting them alongside the plan that I devised with the most able internal person who was not a family member--the technical director,”
Taylor says that after he had identified the right person, they worked closely on the detail. The technical director was soon able to develop his skills outside his normal role and raise his own profile within the company. This gave Taylor the confidence, post-transaction, to hand over the batten to him to become managing director. “He then followed on the plan we devised to drive the plan forward to sustained profitability,” Taylor explains.
“Often my job in any assignment entails getting the management team out of their comfort zone, both in the initial stages and as a constructive challenge along the journey. Remembering that the people need to be on the train with full management commitment; rather than being left at the station – even if you have to drop a few off on the way,” says Taylor.
Once Taylor took on his role as CRO, he restructured internally the roles of the family directors and repositioned their roles externally to manage external stakeholders, such as customers and key suppliers. One of the key objectives was also to manage and reconcile a strategic Japanese supplier/partner sensitively, yet with commercial imperatives.
“We also tuned our significant bank exposure risk to a fully recovered position and ultimately achieved a good ongoing client relationship between stakeholders post-transaction,” Taylor explains.
To ensure a smooth transition for all the changes the company introduced legal advice and correctly consulted and briefed staff. Real-time communication was kept on a daily basis with all stakeholders.
When it was time for Taylor to move onto his next project he identified a new managing director for the company. But the major changes did not stop there.
“The company decided to concentrate on its most profitable part of the business, sales and distribution, which meant moving away from manufacturing, which was unprofitable and cash draining. We revisited what was core and a devised a competitive proposition going forward, while engaging key stakeholder support.”
The management decided that the best course of action for the next stage of the company’s development was to sell shares to its Japanese partner, Mori Seiki. “It was the best solution for all stakeholders. The equity sale represented a win-win position for all key stakeholders,” says Taylor.
Mark Taylor Managing Partner Blue Sky Associates LLP
Mark can take appointments as a decision-making executive to support management, including chief restructuring officer (CRO), CEO and chairman. He is a member of all the principal UK professional services turnaround panels and has worked with client companies and key multi-stakeholders both in the UK and internationally.
T: + 44(0)7786 368715
E: mark@bluesky-associates.co.uk
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