What is Revitalization Partners?

 

What is Revitalization Partners?

Many of our readers and even some of our prospective clients know us as a turnaround firm. But what does that really mean?

Generally, it means that management of a company have found themselves in a difficult situation and a turnaround firm is brought in to resolve the situation and “turn the company around.”

 

TWO DISCRETE AREAS 

As we at Revitalization Partners looked at the range of our assignments over the last year, we realize that a “turnaround firm” doesn’t quite describe what we do.  

While we have worked, over the year, with companies ranging from $1 million to $400,000 million in revenue, each set of problems was different and, in some cases, a turnaround wasn’t necessary, just the need for some good business advice.

In reviewing 2019, we discovered that our work centered around two discrete areas: Finance/Banking Support and Management. Below are the projects we worked on and/or continuing to work on as we move forward into 2020; our 17th year.

 

BANKING SUPPORT …

We worked with client companies to refinance existing credit lines amounting to over $48 million.  In one case, we reduced interest and expense costs, saving $1 million while reducing covenants and providing adequate working capital and credit to support growth.

In another case, we represented and advised a bank group in the workout and restructuring of a $47 million credit; including negotiating a prepackaged bankruptcy and restructuring the debt arrangement between the banks and their client. 

On a smaller scale, we represented an asset-based lender in conducting operational due diligence on a prospective client.

We were asked by another asset-based lender to assist their client in developing and establishing a 13-week cash flow forecast and a monitoring plan. We worked with the bank’s client and were successful in developing a tool for the lender and company to use in predicting and monitoring their ongoing business.

We worked with another asset-based lender that needed expert witness analysis and support in order to prepare for legal action against the guarantor of the loan.

In a long-standing receivership case, RP, on behalf of the bank, continued to manage and maximize return from an in-house venture fund that was part of the original company.

The fund consisted of both corporate and real estate investments. We maximized the return from the investments, liquidating real estate as appropriate.

 

MANAGEMENT …

A member of Revitalization Partners served as General Manager to a family owned service and repair business where there were differences of opinion on management among family members. He was able to streamline and downsize operations, establish a viable forecasting process that allowed the company to develop a more reliable sales projection and improved profitability by ensuring that all services were properly charged for.

Another member of RP served as CFO to a large commercial contracting company in a unique market niche. She was able to significantly improve the relationship between the client and their lender while improving cash flow.  Adapted financial reporting such that the company can properly report with a small amount of continuing assistance from RP.

In serving as receiver for a world-wide technology company with debt in the tens of million dollars, we successfully sold the assets of the company, no matter where located, dramatically reducing the secured lenders debt. 

We identified a portfolio of approved patents, which if monetized has the potential of paying off all creditors. RP in in the process of monetizing the patents by identifying violators and bringing legal action.

Over a two-year period, a member of RP has been serving as CEO for a client company.

In addition to a management restructuring and replacing retiring managers, we identified and led a strategic acquisition, conducted the buy-side due diligence and negotiated a favorable valuation.

The acquisition has been successful from both a management and cultural standpoint and has been substantially accretive to the buyer.

We continue to work with a long-term Revitalization Partner’s client that is in the process of selling to a private equity firm. The RP member working with the client has negotiated a favorable valuation and is presently managing the due diligence process and purchase and sale agreement.

We served as advisors to a client company that was in financial distress. We managed an out of court sale of assets, with the end result of paying off all debt and returning funds to the note-holders/shareholder.

Working with a long-term Revitalization Partners client, we are currently assisting them with our second sale of a portfolio of low-income housing for the benefit of the owners.

 

SO WHAT IS REVITALIZATION PARTNERS?

We are an experienced group of management and financial professionals that focuses on:

  • obtaining results for our clients in the most efficient possible way
  • over the shortest possible time
  • at the lowest possible cost
  • with the maximum return.

Now, on to 2020!

Management Insiders Forecast a 2020 Recession

 


Full employment, happy consumers, a robust housing market and low interest rates are supporting a decent economy. But tariffs, a presidential election a shaky stock market and a looming recession are creating uncertainty.

When companies start cutting back on spending and reducing inventory levels, it can be the canary in the coal mine forewarning of economic problems to come.

So, at a time of increased recession fears, Fortune and SurveyMonkey conducted a poll of key managers at companies in every industry ranging from Fortune 500 to mom and pop companies.

 

SOME TOP FINDINGS …

Some of the top findings indicate the possibility of a recession during 2020.

Over the past 12 months, 29% of the managers said their industry was heating up, 60% said it was holding steady, and 11% said it was cooling down.

Just under half of purchasing managers (49%) said the amount spent on purchasing at their company was up year-over-year in the most recent quarter, edging out hose who said it held steady (34%) and buyers who saw a decrease (11%)

2 in 3 managers say a recession is likely within the next 12 months.

 

SOMETHING HAS THEM SPOOKED …

These managers paint a picture of an economy where there are plenty of companies growing their expenditures but where headwinds like tariffs and uncertainty are growing. 

Industry leaders told Fortune that during strong economic periods, spending is usually up at well over half of companies; something we’re not seeing right now.

And something certainly has companies spooked, considering that two thirds predict a recession within the next 12 months.

Moody’s Analytics, a well-known research firm states: “We look for the economy to grow below is potential in 2020. Corporate profit margins have been compressing as growth in labor costs has outpaced revenue growth. Shrinking margins are often associated with late-cycle expansions and often cause business to be more cautious in hiring and investing.”

Moody’s expect the Gross National Product (GNP) to slow to 1.7% in 2020, down from the 2.3% expected when the 2019 numbers are tallied. That should be a decline from the 2.9% growth clocked in 2018.

 

NOT LACKING BRIGHT SPOTS …

The current economic picture is not lacking bright spots. The most pronounced is a consumer who seems largely contented with the way things are working out, thanks to healthy employment levels that are filling pockets with spending money.

That’s important, because consumer spending is a powerful driver of business activity, representing some 70% of the nation’s economy.

The unemployment rate was running at an enviable 3.7% toward the end of 2019, well below what many economists label as “full employment.” Employers have been consistent in their hunt for workers to fill a growing number of positions. “Monthly job growth has been more than enough to keep up with the growth in the working age population.”

 

LOOKING AHEAD TO 2020 …

Looking ahead to 2020, economists expect recession fears to have a dampening effect on the labor market. “Unemployment is expected to edge slightly higher to 3.9% by the end of 2020, due largely to a deceleration of job growth.”

We expect job growth to steadily decelerate and cease altogether in the second half of the year.

For the time being at least, happy shoppers are good news for retailing, an important driver of the national economy. Moody’s expects core retail sales to increase by 4.0% when 2019 numbers are finally tallied, up from 3.4% of the previous year. (Core retail sales exclude the volatile auto and gasoline segments.)

As for 2020, Moody’s expects retail sales to increase by only 2.3%. “A deceleration of job growth means fewer new people will enter the ranks of active shoppers,” said Scott Hoyt, senior director of consumer economics for Moody’s Analytics.

“And that will exert some downward pressure on retail sales growth that may more than offset the positive effect of the higher wages (and thus the greater disposable income) characteristic of a tightening labor market.”

 

DESPITE THE UNCERTAINTY …

Despite the uncertainty that characterizes many areas of the economy, a healthy labor market and high consumer confidence have done a good job propping up a decelerating business environment.

Will they continue to do so?

And when will the inevitable recession arrive?

 

WHEN UNEMPLOYMENT STARTS RISING

But perhaps the most important indicator of pending trouble is a downturn in the employment picture. “If businesses begin to lay off workers, that will be fodder for recession.

Moody’s states that rising unemployment, will result in a decline in the very consumer spending that has been the driving gear of a healthy economic machine.

Once unemployment starts rising, we are either already in a recession or will be in one very soon.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Season’s Greetings To You And Yours!

 

 
All of us at Revitalization Partners want to wish you, your family and friends a very Happy Holiday Season. As we approach our 17th year, we are grateful for all of your support and look forward to a successful 2020 for each of you.

Getting Fired As CEO

 

As you read the title of this blog, you may be saying to yourself: “I’m the owner of the business, I don’t have to worry.”

Or, “My company is successful, the board of directors is happy, I have nothing to worry about.”

 

CEOs BEING FIRED FOR WRONG REASONS …
But, a record number of CEO’s have been front page news in 2019 for all of the wrong reasons.

High profile dismissals and resignations at some of the worlds top companies are putting all business leaders on notice.

Not to mention all of the CEO’s who left quietly, without the headlines, for falsified resumes, improper relationships and other behaviors that are unacceptable in today’s business world.

 

WHAT ARE THE LESSONS TO BE LEARNED?

What are some of the lessons top be learned from some of the headlines? 

That the best CEO’s aren’t modeling their management styles on outdated ideas about acting “in charge”.

They’re mastering internal and external communications and creating more inclusive and positive corporate cultures.

And they’re open to guidance and accepting accountability.

 

WHAT ARE THE TOP REASONS?

Let’s look at some of the top issues that led to CEO firings.

1. No Awareness Of Blind Spots
McDonald’s fired CEO Steve Esterbook over a relationship with an employee. The leading semiconductor company in the world, Intel, fired CEO Brian Krzanich for a “consensual” relationship with an employee.

When we hear stories like that, a common response is: “What was he thinking?

And the sad fact is that many CEO’s don’t really think through those decisions. Many of them fail to realize that they have significant blind spots that are affecting their work in a negative way.

They let personal matters cloud their business judgement. Or, they’re so enamored with the power that comes from running a company that that they slip into CEO stereotypes thinking they can do whatever they want and rely on their position to mitigate the consequences.

Speaking of being enamored with power, there is the CEO of Papa John’s Pizza, John Schnatter, who was asked to resign due to using a racial slur on a company conference call.

At the time he said: “I can’t talk like that even if it’s confidential and it’s behind closed doors.”   “I did it. And I own it. And I’m sorry. And I’m sick about it, frankly.”   Now, he’s back, claiming the board used race to steal his company.

It’s the thing about blind spots, it’s not so much what you say or do, but how you think.

 

2. A Lack Of Transparency

Not that long ago, CEO Kevin Plank and Under Armor looked poised to grab a huge share of the sportswear market.

But, trying to keep up with competitors led to a shareholder lawsuit because investors didn’t believe the company was being open about its financial position.

To top it off, there were lingering rumors about Plank’s relationship with an MSNBC anchor.

In the end, the ax fell on jobs, share prices and the CEO.

During times of crisis, secrecy and misinformation only make bad situations worse.

Rumors take on lives of their own and bending the truth can break key relationships. If you wait too long to admit there’s a problem, it may be too late to fix it.

 

3. Accountability

Accountability doesn’t just mean yelling “Stop!” when the company is swerving off the road.

It means making a thousand small decisions that could be even tougher.

Like moving on from a popular employee that isn’t cutting it.  Or admitting that a product or service isn’t selling any more.  Or standing up in front of the entire company during a crisis, accepting responsibility and explaining how you’re going to fix what’s broken.  And insisting that everyone in the management team follows the same rules.

You may believe that your company doesn’t have these problems.

After all, you may not have shareholders or you’re not going to appear in any headlines.

But you do have a bank on which you may depend.  You have employees and are subject to scrutiny on social media.  And every company has clients or customers.

Any CEO’s who let harmful cultures and glaring blind spots ruin their companies, may find that bad business is the least of their problems.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

Branding for Mid Market Companies

 

While watching the Monday Night Football game this week, a car commercial appeared on the TV for a car branded the Genesis. Nothing else, just Genesis.

It was a portrayal of a luxury brand in keeping with other brands such as Lexus and Jaguar.

What was interesting was that I had never heard of the brand before that night.

 

IN THINKING ABOUT IT …
In thinking about it, I realized that I had heard of the car before; but as a model of the South Korean brand, Hyundai.   For those of you unaware, Hyundai is a low to medium priced popular car brand.

It is fairly obvious that Hyundai is making an attempt to separate and raise the level of its premium priced product and separate it from the other Hyundai models.

They advertise it independently, have a separate dealer network and, of course TV exposure.

 

WAIT, I’VE SEEN THIS BEFORE!
This is not the first of these efforts we have seen.   Lexus, which was originally a Toyota brand is now a completely separate line of luxury vehicles.

Even the venerable Jaguar, once an eclectic British brand, is now a division of Tata, an Indian company whose low-priced cars are not even sold in the United States.

 

CREATE A MARKETING MESSAGE …

What do all of these companies have in common?

They have marketing and branding money. 

Lots and lots of money.

They can create the images on television, social media and even brick & mortar to drive the message deep into the consumer psyche.

 

 

THE BRANDING GAP …

But what is the smaller or mid-market company to do without all of those resources?

Mid-market companies are like the awkward middle child of the American marketplace.

These companies find significant challenges as they try to find their place among the companies mentioned as well as companies like Nike, Apple and Starbucks, all with significant branding resources.

Search Google or Amazon and you’ll come across hundreds of resources on branding for large and even purely small businesses.

But almost nothing for mid-sized companies.

It’s safe to say there is a “branding gap” for these companies.

 

THE BRANDING GAP …

Mid-sized companies are companies producing revenues between $5 million to $500 million.

They include public and private companies, regional companies, family owned businesses and even non-profits.

Although they represent a broad range of industries and revenue, there are a myriad of branding challenges, stemming from lack of resources, lack of visibility, and often a saturated market.

Yet, despite these challenges, mid-sized companies can compete with the branding of their better known and better resourced big brothers.

Because of their unique strengths and their size, executives of these companies have a favorable outlook on the future.   Why? Because these companies:

  • Are large enough to have adequate capital compared top smaller businesses
  • Are resourced well enough to overcome market challenges
  • Can attract and hire the right people

And, mid-sized companies are small enough to build strong relationships with their consumers and have the flexibility to reinvent relatively swiftly when necessary.

 

THE 3 SUCCESS FACTORS …

What are the factors that can ensure success for these companies?

1. Start With A Strong Internal Brand
Mid-sized companies with a clear and effective employer brand experienced 16% greater performance when compared to companies with employer brands that “need more work”. Executive should begin to identify this brand and deliberately shape it. It’s imperative that employees live by the company culture. No matter the employee, if a customer comes in contact with the company, the consumer should receive the same message. If employees don’t believe in the mission, consumers won’t either.

 

2. Hire The Right People
Like small businesses, mid-market companies frown on bureaucracy and a top down management model. Hiring isn’t about finding an “expert”, but rather, finding an employee that meshes with the company’s culture, brand and mission. Skills can be taught, but character and passion are from within.

 

2. Reinvent Yourself
Agility is the key to survival in many realms and branding is one of them. While every company knows that change is necessary for growth, few are actually doing it; except in the middle market. Unlike the big brands, mid-sized businesses can make changes without going through multiple levels of seeking permission. Imagine a major change at Apple or Nike.

 

 

5 YEARS TO HIT $700 MILLION …

As an example, a British company believed a name change would make their company appear “less English” opening up the market.

And Top500guide.com demonstrated that they were right, growing revenues from $375,000 to $700 million in five years.

Following theses rules can be the key to survival for the mid-sized company, as we begin to see economic growth in the US slow to a forecasted growth of 2.3% in the fourth quarter, down from 4.6% in the second.

If you’re not sure where to start, ask for help.

Your company may depend on it.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.

How Do Lenders Feel About the US Economy and How Do Their Views Impact Your Business?

 

A recent third quarter survey conducted by Phoenix Management reveals lenders are increasingly pessimistic of the US economy in both the near term and long term.

This is a change from the same survey in the second quarter where lenders felt that economic performance expectations increased for the near term.

 

IN A RECENT SURVEY …

In order to better understand why there has been a negative shift in lenders attitude, we highlighted excepts from the survey to gain a better understanding of their views:

> Lenders optimism on the U.S. economy decreased 14% in Q3 compared to Q2 2019

> The majority of lenders believe borrowers will be moderately affected by the current trade war with China and expect a slight increase in borrower costs as a result

>  In Q3 2019, lenders’ optimism increased in large corporate (4%) and middle market (9%), however, expectations for small business saw a significant decrease (-26%)

> The majority of lenders agree that consumer behavior will be key to a continued strong economy. Survey respondents expressed some concern regarding consumer growth and in fact expect some moderation from the previous survey. While moderation is not a negative factor, it is a change from the stronger consumer growth trend the US has experienced in past quarters

> A significant percentage of lenders surveyed expressed concern with the following industries that are expected to experience the most volatility and increasing risk: Retail Trade, Manufacturing, Healthcare, Construction and Transportation and Warehousing

 

THROUGH THEIR OWN LENS …

It is important to understand that lenders view the economy through their own lens, which primarily focuses on risk. Their view influences decisions related to credit risks, new clients and companies they perceive as high risk that could default on their loans. 

It is extremely important that business owners understand how lenders view the economy and in particular how those lenders may assess their business.

The professionals at Revitalization Partners are frequently involved in helping clients find new lenders or refinance existing credit lines. 

Our experience in the second half of 2019 is similar to the shift in lender sentiment reflected in Q3 survey.   In particular, there are many lenders with a significant amount of capital competing for disproportionately fewer deals.

While this has been consistent for the past few years, we have seen an increasing reluctance to compete for deals for companies that have experienced difficulties within the prior three or four years. 

While these companies are currently profitable, their historical experience has played a larger factor in a lender’s decision than it has in the past.

 

CURRENT LENDER SENTIMENT …

So, given the current lender sentiment, how should business owners proactively plan for their working capital needs, including their credit line requirements from current or potential lenders?

First of all, it’s important to focus on the health of your business. Companies that are consistently profitable will be more appealing to lenders than companies that have an inconsistent history of profitability.

It’s also important to understand what level of liquidity is required to operate your business. Liquidity is defined as cash on hand plus borrowing capability.

The level of liquidity required to operate an efficient business is different depending on the capital structure and seasonality of a business.

If your current credit lines are not sufficient to achieve your company’s, liquidity goals, you should develop an updated financial plan and discuss your needs with your banker.

If for some reason, they are not in a position to accommodate your requirements, don’t be afraid to look for other lenders that may be in a position to better meet your requirements.

After going through this process, you may in fact find that your current lender might change their view and in fact offer a program that fits your requirements.

 

IF YOU HAVE QUESTIONS …

If you have questions regarding how you should go about positioning your company to determine the optimal level of liquidity or how to find a lender that will meet your needs, let us know and we would be happy to discuss your business requirements.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.