London February 2024 – Turnaround and Restructuring – Opportunity or Threat?
On 7 February 2024 members of TMA UK and students from London Business School were kindly hosted by London Business School for an evening of lively discourse with seasoned professionals in the world of Turnaround and Restructuring, who shared their experiences and told of the challenges and opportunities of a career in this field and importantly – that it’s not all blood, sweat and bullets!
We first heard from Maria Pombo who gave us an introduction to EACTP, TMA Europe’s accreditation of turnaround management professionals in Europe and which reflects the diverse nature of workouts for businesses in distress across the region. Maria encouraged those interested in attaining European accreditation to attend the EACTP dedicated training session on 11 June 2024 as part of the TMA International Symposium in London.
Tony Groom CEO & turnaround investor of K2 Business Partners wanted all who are interested specialising in restructuring, turnaround or distressed investing to understand the ‘blood, sweat and bullets’ challenges as well as highlights and opportunities in this career choice and moderated a panel comprised of:
- Richard Flemming- managing director and head of european restructuring practice, Alvarez & Marsal (London)
- Andrea Jakes – managing director, Alvarez & Marsal (London)
- Omar Mirza – managing director, Alvarez & Marsal (Brimingham)
- Aiden Robson – managing partner, Endless Funds, Endless LLP
- Giulio Piscitelli – associate director, Interpath Advisory
Perhaps wanting to ensure we had a lively start to the evening, but more importantly to give a real flavour of what situations a turnaround and restructuring specialist can encounter Tony Groom asked each of the panellists to recount some of the turnaround stories that stand out in their careers.
Richard Flemming told us how he had come to the UK from Tasmania in 1989 and within 3 months the UK had gone into recession, and he never went back. He asked us to imagine walking into a company whose business is to lend money to property businesses over which it took second charges. The primary lender thought it was a fraud, we thought it was a fraud and so they appointed us one Friday. We turned up to a padlocked door and had to break into the premises only to find there was nothing there except 4 desks and a broken laptop. Despite this, having recovered the hard drive from the broken laptop and with the discovery of one-half page of a bank statement he and his team managed to trace £3 billion of transactions, tracing them all around the world. A challenge of a different type was being appointed Administrator of Leeds United Football Club and having to deal with ardent fans of the club during its off-season. Football fans are passionate and when they do not have the distraction of matches their sole focus seemed to be on me and discovering my phone number, address and everything about me – it was no joke! To be able to have turned around the club, hand it back and be part of the reason why it is still in existence was in no small way a career highlight.
What resonated the most with Richard was an appointment he took right at the beginning of the coronavirus pandemic over the first ever FTSE 100 company to go into administration. It was a healthcare business looking after 200 hospitals in the UAE, a systemically important business during Covid. It had a $1.5bn turnover but had suffered a fraud to the tune of $5bn and all of the top tier financial management had absconded. Richard, with assistance from the ruler of Abu Dhabi, had to fly a team over to Abu Dhabi in the face of a quite unreal situation. With no funding to pay wages to its many employees, necessary to ensure the patients could receive their brain surgeries, heart surgeries and Covid treatments had to borrow $350m to meet rescue costs, a not inconsiderable burden for any officeholder in any circumstances. Despite (or perhaps because of) this he and his team managed a two year turnaround operation resulting in a debt for equity swap so that it is now owned by the creditors. He now has a wry sense of satisfaction in that he and his team are now litigating against the bad actors to try and recoup some of the fraudulently dissipated monies.
Omar Mirza winner of Turnaround Practitioner of the Year 2023 at the TRI awards, based at Alvarez and Marsal’s Birmingham office and a mid-market specialist working with businesses with a £10m to £40m turnover, considers himself at the intersection between the world of finance and the real world. He recalled walking into a scrap metal business to meet with a director and handed him a letter of engagement. All pretty standard. The director signed the engagement letter and then proceeded to take his samurai sword off its wall mounting asking Omar “I trust all is in order with this engagement letter otherwise I’ll be using this sword”, to which Omar gave a resounding “YES!”. However, it’s not all low-level or actual threats and he recalled one year in Leeds when he had to make the employees redundant on Christmas Eve; a particularly challenging undertaking for any professionals but especially so at that time of year. However, he need not have worried about flared tempers and retribution from angry employees because when they came out of the building and saw he was driving a Rover Metro, worth about £500, one of the employees said “mate, you’re worse off than we are – come and have a beer with us!”
At this point Tony Groom made the important point to all practitioners that perception and appearances are key when dealing with distressed situations and that we must be mindful of the optics at all stages of engagement because a professional turning up to a business to make people redundant driving an expensive car is not an image we should be presenting.
Andrea Jakes has been involved in the profession for over 20 years and endorsed the underlying point to both Richard and Omar’s recollections being that as a professional in this field you are very often having to bring yourself up to speed in what the business does and how it operates sometimes in an extremely short timeframe. Consistently, the professional is entering a new situation and new sector on short notice. She recalled heading to the first meeting on MF Global and having to understand what the company did on the way to the meeting because on arrival they were straight into meeting with the management and decisions had to be taken that same day. There was a shipment sailing into Rotterdam and we had to make a decision that day as to whether to accept that shipment that day. So, you have to be adept at finding the correct person within an organisation who is going to be able to provide you with the information you need in order to make those key, day one decisions.
Andrea was keen to stress that engagements are not all London or UK centric and at the time of the European financial crisis in 2015 she got a call to assist the Bank of Cyprus and duly headed off for what she thought was a 6-month assignment and came back 5 years later! She thoroughly enjoyed the time dealing with a different type of organisation with a different type of stakeholder in circumstances quite different to those in the UK.
Aiden Robson prior to joining Endless and becoming managing partner of Endless Funds, actually worked with Richard Flemming, who he described as his first boss. His team currently have £1.5bn under management and approximately 20 companies in the portfolio including Hovis and American Golf. The fun part of his job is working with broken businesses and fixing them. A number of years ago they bought a food company that was losing £20m p.a. at EBITDA level per year. Despite all advice to the contrary, they decided to buy the business and invest in it, embarking on an amazing journey. They took a business hampered by in-fighting and an inability to work together, that it had lost its way and 3 years later had turned it around to one that was making £35m p.a. and by the time they sold it, it was a completely transformed business turning over £500m and it has continued to grow since.
Giulio Piscitelli’s story resonated with those in the audience who were either studying or considering a change of career as he informed us that 5 years ago, he was sitting where they are now and had a mid-career change first joining KPMG and then Interpath Advisory working in the restructuring and turnaround arena. What he really likes about the industry is that it’s not just about finance and numbers but it’s about understanding and being able to read people. He reminded us of the importance of not misjudging people or rather not misjudging their expected reaction to your recommendations.
Tony highlighted the common thread in the above is that the turnaround professional is often on the spot having to make a decision with not very much information and to do that you have to draw on a lot of personal qualities and possessed of an immense sense of identity, character and integrity so that you can feel confident that you can make what you believe is the right decision in highly pressurised circumstances.
The point about integrity was echoed by Richard who stressed that in order to work in this field you need to have real empathy for people. We work in sometimes challenging and stressful environments and the way that you conduct yourself and how you deal with other people is of great importance. At the same time, you have to show what makes you stand out and he particularly addressed the students in the audience at this point – encouraging them not to be shy but to take the initiative and be proactive.
In terms of standing out from the crowd Guilio thought a person’s emotional quotient (EQ) level was a key element in forging a career in this area because in an industry where numbers are important and everyone is good with numbers then to stand out you have to have a strong EQ and he encouraged the students not to overlook this element and to seek out courses that could help them improve their EQ levels.
Omar advised those looking to become involved in the turnaround profession of financial services to be flexible when exploring opportunities at the early stages of your career. From a practical perspective he recommended taking steps to become a chartered accountant because it keeps you marketable in the early part of your career whilst you are considering whether to go into industry or into restructuring on the advisory side of things.
Both Omar and Richard emphasised the need to be a person who is thorough and inquisitive because when you walk into situations you will be told a different version of events by different stakeholders e.g. management or lenders and have to be able to interrogate and get to the deeper answers as to why the company is underperforming and what is the best strategy to employ to get it back on track.
Teamwork and being surrounded by talented people who will shape you was a key point from Aiden, so much so that if you are not working with talented people then you should leave! He likened the turnaround professional to one who, when everyone is running away from the fire, is the person running towards it! Turnaround professionals are problem solvers who are not afraid to ask the stupid or obvious questions. You also must trust your gut instincts and know that not every decision is going to be the right one, but a good turnaround professional learns from their mistakes and does not repeat them.
Andrea drew the audience’s attention to the composition of the panel and that it was representative of the of the industry in that females account for approximately 20% of professionals in this industry. She urged not to try to be something you are not and to have the confidence to be yourself recounting that when she is in a conflict situation on a project, she will take a different path to the expected aggressive stance and have a more relaxed, pragmatic approach.
All panellists agreed the next 2 to 3 years were going to be very busy for restructuring and turnaround professionals. We should not underestimate the impact of artificial intelligence on a whole swathe of businesses or that management teams in general will continue to get it wrong. As Richard put it – the opportunities are enormous because there has been enormous change in recent times and where there’s change there is disruption and where there is disruption there lies the opportunities for turnaround professionals. It’s a great time to get involved!
Thank you to all our panellists for providing the audience with guidance and a real insight into what it really means to practise in the field as a restructuring and turnaround professional. We hope to see you at our next TMA event hosted by BDO on 13 March looking at ESG in a business turnaround situation. Visit the TMA UK website to see what other events are coming up.