Corporate turnaround: Real-world solutions in times of crisis

Recent economic challenges associated with the COVID-19 pandemic have reversed course in a dramatic fashion for many businesses, with little opportunity to plan for the downturn. If your business is experiencing trouble, you’re not alone. Across Canada, middle-market businesses are seeking solutions to return to profitability. Though the exact strategy will differ for each organization, one such path is internal restructuring through corporate turnaround services; to achieve the objective of staying in business until we return to a semblance of normalcy.

At Zeifmans, our veteran team of professionals brings fresh insight into the diagnosis of marketing, financial, operational and tax issues. Over the last 60 years, we’ve developed a reputation for our innovative and aggressive corporate turnaround solutions that consistently achieve results.

External impetus
Though there are many reasons why a company may begin seeking out corporate turnaround services, recent events pertaining to the pandemic have presented external, economic challenges. Where an economic boom can cover up errors, a slump will bring existing flaws in strategy or leadership to the surface.

COVID-19 protocols have caused many consumers to lose their jobs, diminishing expendable income. Businesses have had to close their doors entirely. The economy is slowing to a halt. It’s time to take decisive action in order to preserve short term liquidity and long term profitability.

Early warning signs
Though it goes without saying that the COVID-19 pandemic is a warning sign in itself, as mentioned, the new economic crisis may also reveal existing weaknesses. These could include:

– Lack of goal setting, results-evaluation, and altogether accountability
– Significant off balance sheet as sales are reduced
– Inadequate monitoring of profit and cashflow
– Management do not have the skills to manage current crisis
– Product lines becoming obsolete
– Working capital asset deterioration
– Reliance on a small number of customers or suppliers
– Reduced liquidity as a result of deteriorating assets
– Capital structure that is over-leveraged
– Poor succession planning

Evaluating viability
The first task in evaluation is to establish whether the company is facing short-term survival questions, or profitability performance challenges that are less severe. In the case of COVID-19, this may or may not be more difficult to determine, given that there is a high level of uncertainty in diminished purchasing power  and the timeline of the economy returning to normal activity.

It’s helpful to first identify the viable business segments, and establish whether there is an adequate gross margin to enable the business to remain competitive. The review of business lines may result in the elimination of unprofitable ones; this is where the Zeifmans team is equipped to assist you in achieving greater understanding, even under uncertain circumstances.

Elements of successful corporate turnarounds
Once it has been established that there still exists a viable core operation, the turnaround can begin. A hands-on management style should be introduced, in which absolute authority is given to the board. This stage will be characterized by tight controls, and an emphasis on factors that will motivate employees to adopt the new, stricter strategy.

During the early stages, management must control the cash flow pipeline. Budgetary performances and margin refinements, as well as purchasing and head count all become critically important.

In shrinking back down to the business segments that provide positive cash flow, it’s critical for companies to stay close to their market niche and to use marketing ability in an opportunistic manner. Here we keep it simple. Build on core product lines and avoid excessive diversification until the company returns to a state where greater complexity can be sustained.

Turnaround management services
Zeifmans acts on behalf of creditors, shareholders, private and institutional lenders and investors, and debtor companies to restore profitability through innovative strategy. We accomplish this through the following services:

– Financial and operational analysis, identifying problems and solutions
– Conducting viability reviews
– Acting as advisor on matters of divestiture of troubled corporations
– Formal insolvency services
– Interim and crisis management assistance
– Accounting and taxation advice
– Human resources rationalization

We recommend early engagement to diagnose and create recovery plans before it’s too late. During this time of unprecedented change, don’t wait to take action. Start a discussion with us today that could keep your business afloat for tomorrow.

Suggested supplemental insights

Zeifmans COVID-19 Resources Centre

COVID-19 Business Survival Strategies


Q&A with Partner, Jennifer Chasson

Q&A with Partner, Jennifer Chasson

With over 25 years of experience and 100+ successful transactions under her belt, Partner, Jennifer Chasson, brings invaluable expertise to the table. Whether it’s guiding as an advisor, mentor underwriter, ...