For Turnaround Firms, Diversity Is The Name Of The Game
Jacqueline Palank
May 11, 2012
Turnaround firms are adapting to a slowdown in traditional corporate restructurings by broadening their capabilities
and reach, a trend that's already sparked one merger and which insiders say could spark more.
The slowly recovering U.S. economy, fewer big commercial bankruptcy filings, lenders' willingness to push out loan
maturities and tough-to-crack credit markets have chipped away at demand for the advisers who can shepherd a
troubled company or its creditors through a debt restructuring.
But these advisers are finding that they can get hired if they connect with a company when it needs tax advice, is
looking to boost its profits or needs its assets valued so it can put itself on the block. Advisers are also looking at
smaller companies, faraway companies, healthy companies, or companies just starting to show signs of distress.
"You don't want to be pigeon-holed," said Charles Goldstein, a Protiviti managing director who leads the firm's
litigation, restructuring and investigative practice.
For an industry that prides itself on its problem-solving abilities, a tough market doesn't mean hunkering down and
waiting for work to pick up. In fact, the opposite is true.
"Challenging times present opportunities," said Ron Sussman, president of the Turnaround Management Association
and a Cooley LLP bankruptcy partner.
The consulting side of Big Four audit firm Deloitte saw one such opportunity in its recent acquisition of restructuring
firm CRG Partners.
"Although they've had strong financial advisory services divisions, with adding CRG in, they're adding real companyside, hands-on, restructuring-consulting expertise," Sussman said. "It really makes them a powerhouse."
Deloitte's Sheila Smith, co-leader of the U.S. restructuring team with CRG's William Snyder, said the combination will
allow Deloitte to become a one-stop shop for clients.
"We think that CRG's talent will enable us to get in earlier and in so doing, sell through a broader suite of services,"
Smith said. "We should be able to work with a company through its different issues through the life of a turnaround."
Another turnaround firm stretching its reach is industry stalwart AlixPartners, which recently agreed to be bought out
by global private equity firm CVC Capital Partners.
AlixPartners has already widened its focus beyond traditional turnarounds, adding performance-improvement
consulting and other services to such a degree that restructuring is no longer its bread-and-butter.
The next goal is to go global, making CVC and its European and Asian offices an attractive partner to a firm that's
already established a footprint in places such as Munich, Paris and Tokyo.
"Right now AlixPartners has lots of room to grow in Europe and Asia," said AlixPartners Chief Executive Fred
Crawford. "They're going to enable us to grow faster."
There's another way for firms to diversify besides their capabilities and their locations, and that's their client base.
Fewer bankruptcy filings by large, publicly traded companies means the firms that specialized in those cases are
thinking smaller.
"You've got very capable people that typically do larger deals. Some will look to the middle market and try to deploy
their capabilities," said Huron Consulting Group managing director Dan Wikel.
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It's a tack that Crawford said Alix Partners is taking. So is Deloitte.
"That's why CRG is so interesting to us," Smith said.
Expect to see more firms expand in every possible way, restructuring professionals say. Even so, with no surge in
bankruptcy activity expected this year, there still won't be enough work to go around.
"The industry has overcapacity," Crawford said. "I would anticipate continued M&Ain the industry as the supply-anddemand balance swings back."
One place to look might be Deloitte again. Smith said CRG may be the first of other deals on its to-do list.
"We're going to be on the move, so buckle up," Smith said. "We have some things we still want to do."
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Copyright 2012 Dow Jones and Company, Inc. Copying and redistribution prohibited without permission of the publisher.