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What’s keeping midsized companies busy these days?
This question seems to be cropping up more and more in our conversations with customers and other interested parties. The financial media tends to focus on blue chip companies, almost ignoring midsized international operating companies which, by the way, are almost all privately owned.
At Blue Capital Management, we work in this segment a lot and it’s fair to say that we have a decent view on the segment’s current status, but more importantly we have a good idea of the emerging trends.
It goes without saying that this segment has also been hit pretty hard since late 2008 and has seen almost no serious recovery to date. In the time since the onset of the crisis there has been a strong focus on costs and cash and unfortunately many of these companies also faced serious trouble with their financial stakeholders. Which in turn, in many cases, made the problems in the short term even worse. Fortunately most of these companies have now seen ‘bottom’ and slowly there seems to be some light appearing at the end of the tunnel.
However, if a company hasn’t had the right focus for the last few years and has lacked the financial means to invest in its future, then we shouldn’t be surprised that ‘standing still’ in fact tends to mean ‘going backwards’. In other words, the company’s competitive edge has probably been damaged and needs some serious repair, and fast. But what kind of repair will be effective for these companies?
My previous blogs have mentioned companies with limited or no ‘top-line focus’, ‘ineffective customer intimacy’, ‘lack of strategic workforce planning’, ‘the effects of serious distractions’ and so on. This is exactly what many of these companies are wrestling with and, without a sound financial business plan, financiers are not too keen to fund extra investments, making things even worse.
For management coming out of a serious crisis and with limited or no experience in dealing with a strategic business recovery, you tend to fall back on what worked in the past: let’s brush ourselves down and try harder! And while that’s completely understandable, it’s not the effective repair that’s needed.
It’s been many years since the start of the crisis and for every company, large or small, if management hasn’t been able to scan the radar effectively and take the measures required to establish to an appropriate course of action in time, then the company definitely needs more than just trying harder!
Social media and technological developments have for sure changed the competitive landscape, pricing models have been changed to adapt to cash flow challenges and, in the meantime, pricing levels have been adjusted to cope with overcapacity… but what about the cost levels?; the workforce may no longer be cutting edge and may need a critical and strategic review and, last but not least, the company’s DNA probably needs to be transformed from focusing inward to focusing on the top-line. In other words, the company needs a serious strategic and tactical reset and to be organised accordingly.
Slowly the M&A market seems to be picking up and, besides the traditional private equity activity, we’re also seeing midsized companies organising stressed or distressed asset sales to deal with non-core and/or non-performing units, which can be seen as cleaning house as part of the strategic reset.
Due to the strategic resets, midsized companies are also considering further optimisation of their production capacity footprint to right-size cost levels and to fuel growth. This requires a premium business plan including the supporting financial models and, for the funding, requires the appropriate financiers.
Given the forecast slow economic improvements in Europe, we believe all these themes will be on the company agenda for at least the coming 18 to 24 months, which is precisely the reason why we have developed and invested in our service offering, or ‘the wheel’:
Starting late in 2013 with restructuring work-outs for banks, our advisory and execution work has increasingly shifted towards helping midsized companies with strategic resets and their organisational consequences, selling stressed and distressed assets and supporting management with targeted business planning and debt advisory.
What seems to appeal to our customers is that we not only provide robust independent advice, but we are also committed to delivering high-quality implementations performed by a team of leading interim professionals. This is our area of expertise due to the type of cross-functional projects we perform and our unique combination of advisory and implementation capabilities. In other words, we combine advisory with execution to get the job done. And this is precisely what our customers appreciate about us: in doing so we accelerate the execution time and deliver on our promises!
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.bluecapitalmanagement.nl and, on behalf of all the Blue Capital Management partners, I wish you well.
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- November 8 2015