This episode of Cascade Conversations features Cascade Managing Directors, Ron Miller and Rajesh Kothari. Listen in as they discuss what restructuring really is, how it helps businesses and when a restructuring engagement is most beneficial.



Welcome to Cascade Conversations. Join the team at Cascade Partners and their network of trusted advisers as they work to demystify details, terminology and strategies in the world of acquisitions, divestitures and financings.

Rajesh Kothari – Cascade Founder & Managing Director: Thanks for joining us for another Cascade Conversations today. We’re sitting with one of our own, Ron Miller. He helps lead our restructuring practice here at Cascade Partners.

Ron, thanks for joining us and having a little bit of a conversation today about the restructuring practice. You know, it’s not always clear when folks need to call in a restructuring specialist. It can be very nerve-wracking. When’s the right time for someone to start thinking about that might be the help they need.


Ron Miller – Cascade Restructuring Lead & Managing Director: You’re right. It’s very subtle. It’s often when good companies begin to have reduced margins, inventories begin to grow, there are exits of executives—those are signs that they’re beginning to have stress in their operations.


Rajesh Kothari: I’m sure a lot of entrepreneurs are saying, “Hey, I have that stress all the time, but I don’t need a restructuring specialist.” Those aren’t always problems that are dire, but you’re saying those are really signs; and that’s earlier than I think people think about bringing in a restructuring specialist, right?


Ron Miller: Well, we do performance improvement, helping companies that are good be really be great companies. And we have a different perspective. We have a lot of experience with a lot of good high performance companies, and we are able to share that experience with entrepreneurs, owners, and leaders of businesses to improve their performance.


Rajesh Kothari: And unlike others, our team really has on the shop floor leadership experience. I mean, having been yourself an officer and executive, but that’s a little different about our team isn’t it?


Ron Miller: Yes, very different. We’ve been entrepreneurs for decades. We’ve sat on the seat that our clients have sat in and experienced the stress or stresses that they are experiencing at the time. And we have seen a number of different solutions to some of the issues they’re dealing with. So, our experience brings a lot to them.


Rajesh Kothari: Yeah, because oftentimes I can’t just an executive or an entrepreneur just do this on their own. Why do they need to help? I mean, everybody has good times and bad times.


Ron Miller: Well, they tend to be very myopic, very focused internally on their business and lose sight of what advances, new technologies, new processes, and new methods are out there that other people are developing. And that’s where we see a lot of good performance and we bring those experiences to our clients.


Rajesh Kothari:
Yeah. So really, I mean, we’ve seen it across all our practices, right? We very purposefully try to take expertise and insights from multiple companies that we’re working with to be able to bring to bear on any individual dynamics or solution.


Ron Miller: Right. Yes, that goes across all companies and industries and so on.


Rajesh Kothari: So, in other cases, what are we really bringing to the table? What’s the Cascade team really bringing to the table that the entrepreneur or the private equity partner doesn’t have that’s going to help them through these challenges?


Ron Miller: While staying experienced throughout the entire organization from the top to the bottom. As you mentioned before, much of our team is experienced on the shop floor and in middle management. And so, many companies, shareholders, and investors look at kind of the top of the organization and don’t understand that much. If there are performance issues, they come from up from the bottom in the middle of the company and that leadership is an issue and important, but there are issues throughout the company that often challenge performance.


Rajesh Kothari: And you often had to be that objective, third party voice to help shareholders make a transition and part of the leadership team. Can you talk a little bit about what you’ve had to do there and how that’s impacted the companies that we work with?


Ron Miller: Well, I mean, we’ve assessed evaluated the entire organization. We’ve looked at ‘Are the right people in the right seats and have they developed processes that are efficient and help them be competitive in the market?’ And so, we go deep and we go thorough and again—with our breadth of experience—were able to substantially improve profitability if they haven’t gone through this exercise before.


Rajesh Kothari: Yeah, I know that you said in many cases you’re able to use the benchmark that you’re seeing from other organizations to say whether the company has been maybe doing better than they thought when they compared to the competitors in the marketplace.


Ron Miller: Yeah, we we see that quite frequently where we will analyze the financials and determine that margins are not consistent with their competition. And they’re surprised that their competitors or others in their space are achieving even greater margins than they are. So, we bring a lot of benchmarking experience to them and help them set new goals of performance.


Rajesh Kothari: Well, and I know that often a key mantra for our restructuring team is that hands-on engagement; that you’re not just coming up and helping develop a plan and saying, “Good luck, go implement it.” You really get your hands dirty.


Ron Miller: Right. We work alongside of our client. We say, I do, we do, they do. And so we began with showing them, working alongside the different teams that need help. And as they develop that experience and make those changes, we then phase out. So, we leave when they have been successful in the transition and hitting their goals established collectively.

Rajesh Kothari: So, not just a plan, right? Really hands-on?


Ron Miller: Yeah, yeah. They are where they are because they have had challenges in executing. We are there to help them execute a new plan.


Rajesh Kothari: And sometimes, restructuring and we’re getting called when it’s a crisis. Right? And it’s beyond the “Hey, we’re starting to see the trend and the wheels are really coming off the loss,” if you will. How does our role change there or how do people benefit from that?


Ron Miller: Well, it’s the sooner the better. Obviously, often we are introduced to a client that if we’d only been introduced six months earlier, we would have had more options and it would’ve been less of a challenge to help them fix whatever issues that they may have. But, even if it’s a little late, there are a number of solutions that we’ve been successful in helping our clients through.


Rajesh Kothari: So, obviously one of the big drivers in this is lenders. Because when companies start having trouble, the lenders are the ones that are getting tense and saying, “Hey, you got to develop a solution!” So, how do the banks benefit from having someone like us involved?


Ron Miller: And the first thing we do is we help educate our client that their interest and the bank’s interest are aligned more than they feel. They are, are often unhappy with their bank if their bank introduced an advisor or suggested an advisor. So, they think the bank is being unfair. The banks are actually trying to help them and we’re there to help them. As I said, their interests are aligned and as they understand that they begin to work more cooperatively with the bank, and working cooperatively together is going to achieve much better results than in working competitively for it.


Rajesh Kothari: Yeah, and for the bank, I mean, that could mean maybe some accommodations and some working with the client as part of that.


Ron Miller: Right, right. Well, our job is to really inform the bank of what’s really going on. So, we develop a lot of data and we communicate, communicate, communicate with the bank. And again, because their interest are in making sure that their customer is successful and able to pay them back. So, the information, getting to understand exactly what’s going on within the company is critical.


Rajesh Kothari: And so, I get it how the bank can benefit. So, how do shareholders and executives benefit from calling on a third party like us and to really help them when it gets this dire.


Ron Miller: You know, we introduce change, which is often a challenge for business owners or business leaders. But they benefit because the company stops doing the same old thing and having the same results. So, we help them change, we help them understand. Typically, the leadership learns a lot about their business with a third party coming in and giving them a different view and a different skill set.


Rajesh Kothari: And, oftentimes, you’ve been able to very successfully transition out of one bank and actually bring in a new partner that can help them continue their growth—maybe different dynamics—but, I mean, that ultimately is one of the things that we’ve been very successful in helping our clients do.


Ron Miller: Yeah, it’s one of the options and it’s really what is the best outcome for the client and the other stakeholders. Sometimes, it’s finding a new lender, sometimes it’s buying some additional capital invested, sometimes the bank retains the customer because things have changed, performance has improved and the relationship was improved. So, I think that’s a win certainly for the bank if it can be restored to the credit. And it’s a win for the bank, if they no longer want to credit, for us to find another bank.


Rajesh Kothari: You know, our team has worked across a lot of unique cases. I mean, every one of them is unique in the circumstances and the things that led up to the challenges that they’re facing. But what are a couple of the most common mistakes that you see organizations do when they get into these difficult situations that makes their lives more challenging? If you can limit that to two.


Ron Miller: (Laughs) Limited to two? Um, pushback on their lenders; not understand or deny that they have issues and performance issues, and they’re not meeting the expectations of their lender; and refusing to change—refusing to take a hard look at how they’ve been performing and not being realistic about where they are.


Rajesh Kothari: And the dynamics. And what are the consequences? I mean, what do you see are the consequences when they stop communicating or challenging their bank, when the bank has concerns or is raising these red flags.?


Ron Miller: The consequences can be losing their business. They need to be open to the change and taking on new ideas and, again, appreciating the risk that the other stakeholders are in.


Rajesh Kothari: You said earlier that oftentimes one of the challenges that people have is they wait too long. And you and I have seen in many cases where attorneys probably have actually the greatest visibility that challenges are brewing. And how do we work with attorneys when they see these dynamics beginning to develop with the clients? Maybe even before the banks have kind of raised the red flag?


Ron Miller: Well, it’s trying to prevent disputes and disagreements, obviously. Trying to identify what the issues are and then disclose them. Bring them out to the other stakeholders. Like we’ve often been the first to let the bank know that there are issues before they’ve recognized that. So, it’s a variety of different situations.


Rajesh Kothari: Yeah, and I think I’ve seen where in some cases you just described, or we’re talking to the bank on behalf of the client for the first time and really been able to use that as a tool to help the client be able to frame that, position that, and talk about it in the language the bank likes to hear and is used to hearing with a plan of, “Hey, here’s the dynamic and here’s the solution.” rather than, “Oh my gosh, the building is on fire and we don’t know where the fire extinguisher is!”


Ron Miller: Exactly. You know, determine what the issues are, what the solution is and come to them with all of it—open up, share it with them and give them solutions so that we can work positively towards a good outcome.


Rajesh Kothari:
Well, Ron, I really appreciate you taking the time to chat a little bit more about our restructuring practice and and hopefully gave folks an opportunity to understand the scale and scope of what we’re able to provide.

Want to learn more? Please reach out to any of us on the Cascade team. We’d be happy to share how we might be able to help your organization.