Batting .700 in the Turnaround Game
Interviewed by Erica Friedman

Interview with Robert Handler, CRO, Turnaround Professional		 Date Interview: 07/23/2009
Date of Credentialing:
Credential expiration:
 

How did you come to turnaround work?

My professional background has almost always been in distressed situations. Twenty plus years ago I started in a bankruptcy firm, so my background began as a bankruptcy litigator.

And from there to owning your own firm.

I moved into commercial lending transactions as general counsel for an asset based lender where we were financing companies that were in varying degrees of distress, and we prided ourselves in being turnaround lenders. Thereafter, I moved to a turnaround management firm where we managed distressed businesses either as the chief restructuring officer or the chief turnaround advisor. Shortly thereafter I opened up my own firm to continue that practice on my own.

How do you get key stakeholders to agree on what’s worth saving?

You have to get the owners of the business and the lenders to agree on the best way to protect the key assets of the business. Which assets should be protected? And how do we find a safe home for them? That may be a combination of getting them to agree on keeping the doors open for a few more months while we solve the problems in the company and/or getting the stakeholders to agree what we need to do in order make a clean sale of certain assets.

Talk to us about pillows and mattresses, Bob.

We were brought in as assignee for the benefit of creditors. The owner was not in a position to run the business on a day-to-day basis. The current management and the owner appeared to have different goals for the business, and management didn’t have a realistic stake in the business. So the business suffered because of the total disconnect between the CEO and the owner. We became the assignee and had to find a way to sell the business under the best possible terms. When we took over the business as assignee in September 2008, we got rid of the worst product line, stabilized the business, and continued to run it without any additional cash infusions from the owner or secured creditor.

So how did it turn out?

We got three offers for the company on a going concern basis, one pulled out during due diligence, but the remaining two pulled out because they could not get financing. We then packaged the business assets for an auction sale. At the auction we actually did better with selling the business in lots than the going concern offers we previously received.

 

Batting .700 in the Turnaround Game -- Robert Handler, CRO, Turnaround Professional

With more than 25 years of professional experience in commercial financial transactions, Robert Handler is expert at managing turnaround situations and other matters of corporate financial distress. In addition, Handler has dealt with business reorganizations, acquisitions, mergers, court-supervised receiverships, sales and liquidations across the country and in a wide variety of industries.

In this recession that’s a big win.

Sign of the times. In this economy the sum of the parts may be greater than the whole. One strategic buyer purchased the intellectual property. Then, the former CEO and his most ardent competitor bid against each other for most of the remaining equipment and assets. It was a very successful auction sale. Even though the owner and the lender took a loss, they did better than they thought.

They got out from a very distressed situation.

Yes.

What do the industries that you work in have in common?

Every business that we see usually comes to us with the same situation. This is usually the day before payroll is due and they cannot pay it.

That’s right on the edge.

That’s also a slight exaggeration. But it underlies the situations we usually face. We frequently get calls from businesses that are facing foreclosure, IRS levies, overdue pension obligations, and trade creditor pressure. Most often, we are called in by banks or law firms who ask if we can come up with a plan to save or preserve the business. Both Chapter 11 and chapter 7 filings can be expensive and may have uncertain outcomes, so the stakeholders look for an alternative that may be better, faster and cheaper.

 

 


What’s your batting average – how often do you get stakeholders to agreement?

I’m batting .700. I am successful about 70% of the time in getting the key players to agree early on what is worth preserving and how we should go about it.

That’s pretty good. The key thing is getting them to see the alternatives as more painful?

We generally try to show the stakeholders that the path that we can execute will be more efficient in terms of saving time and dollars, and with a more certain outcome. We benchmark our services against the time, cost and results in managing the business through a Chapter 11 proceeding.

"I am successful about 70% of the time in getting the key players to agree early on what is worth preserving and how we should go about it."

Specifically how do you show that?

A Chapter 11 proceeding can impose a substantial administrative burden on a company. Our goal in most restructuring or assignment situations is to turn a business around faster; perhaps sell a business on better terms and conditions than a bankruptcy trustee could under similar circumstances; and deliver the same or better results with substantially lower administrative costs. If we can do that on a consistent basis then I think stakeholders will deem us as the first option before considering bankruptcy.

What guides you?

It is very important to us and our clients that we are transparent, credible, and that we deliver as promised.