rethinking

restructuring

It’s time to reflect on restructuring

I am truly flattered to be nominated by the Dutch corporate, banking and private equity stakeholders as one of the six ‘best restructuring advisors’ (as part of the M&A Awards 2017). Last year’s nomination came out of the blue and now being nominated for the second time in a row has triggered some reflection on my part, which I would like to share with you.

First of all, with all due respect to the other esteemed nominees, I don’t consider myself a restructuring ‘advisor’.

During my professional career for the past 30 or so years, among other things I have planned, initiated and carried out many restructurings as programme manager, CRO, CFO or CEO across many industries and borders.

The big difference now, compared to my time at KPMG as a restructuring advisory partner, is that, as the person ultimately responsible for a restructuring programme, the buck stops with me; standing shoulder to shoulder with financial stakeholders, creditors and employees, presenting the restructuring plan, convincing them that it can be done, that the risks are being identified and can be mitigated and that the continuity of the company or asset will be secured.

In other words, these stakeholders have to put their trust in me, and their company’s funds in my hands, as the initiator and chief executor of the restructuring plan, and then they have to hope for the best. And I can tell you that on every occasion when I was in charge, although I was convinced of the quality of our plans, the team and the outcome, the pressure was extreme. I knew an intense period of hard work lay ahead, which required me to show leadership when things were not going exactly according to plan and to stay calm whatever happened, to keep an eye on the bigger picture and the ultimate objectives and not to let other events blow me off course.

Sadly I have seen too many half-baked and failed restructurings in my career. For instance, where the restructuring was meant to cure the symptoms without a proper root cause analysis of the true illness. Or restructurings where the knife cut too deeply, destroying untapped value indefinitely.

In January 2003, I was asked by the Board of Getronics as CRO to “bring the company into safe harbour”. The company was making losses, had no or hardly any new funds available, bank covenants were being breached triggering a cross-default with the bond debt and, last but not least, management had just gone through a failed debt-for-equity swap.

In other words, the company’s business continuity was seriously at risk, causing customers and partners alike to rethink their managed ICT services strategies and many talented and seasoned employees to jump ship. These situations are the ones where there’s really no time to lose and it has to be all hands on deck. This requires: a rapid analysis of the situation and the root causes of the challenges; communication to all stakeholders about the plan, ensuring they are part of the solution; timely decisions; and working as a team to navigate out of the storm into safe harbour.

These types of situation can be compared to taking the pilot’s seat of a multi-engine aircraft in the middle of a violent storm, with one engine out, you’re over mountainous terrain and your situational awareness is compromised. Believe me, speaking as an actual pilot, this is your worst nightmare. But as a pilot (or as a business leader), your training, experience and survival skills take over and, while keeping the plane in the air on one engine, you listen carefully to your intuition, make the necessary analysis to form a plan, look for team support, start heading to a place of safety and communicate your intentions to air traffic control. At least that’s how I did it with my management team in 2003. After developing an entrepreneurial plan, we started selling surplus assets, solidifying customers, reducing headcount, cutting costs, managing cash flows and, by doing so, managed to get Getronics to that safe harbour earlier than expected in August 2003. After a re-orientation of the strategy, our new approach formed the basis of Getronics’ improved business performance for a number of years, leading ultimately to the successful sale to KPN in 2007.

Every day when I’m on the road, passing cars, vans and trucks with the logos of companies I’ve been involved with in the past few years initiating and executing a restructuring programme as CRO or CEO, I realise that the driver is probably unaware of the difficulties and challenges the company faced at the time. That my contribution as CRO leading the restructuring was good enough to allow them to be servicing their customers today as if nothing happened.

That’s the way a successful outcome of a restructuring programme should be: a return to business as usual for the company, with a stronger balance sheet and with enough situational awareness to respond immediately and effectively to changing circumstances, to stay agile and able to seize the opportunity!

This is what motivates me and my Bold Capital Management colleagues every day when working with customers in challenging and transformational circumstances.

I would be delighted to discuss this and any other topics with interested clients or candidates. Please don’t hesitate to get in touch with me at www.boldcm.eu and, on behalf of all the Bold Capital Management partners, I wish you well.

Klaas Wagenaar

Klaas Wagenaar

Partner