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Restructuring & Performance Improvement – Signs your business may need them

Cascade Conversations Podcast

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

 

Transcript: 

00;00;00;11 – 00;00;16;26
Announcer
Welcome to Cascade Conversations, joining 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.

00;00;16;28 – 00;00;43;02
Rajesh Kothari – Cascade Founder & Managing Director
Thanks for joining us for another cascade conversation 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. Tell you 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 that right time for someone to start thinking about that might be the help they need.

00;00;43;04 – 00;01;03;12
Ron Miller – Cascade Restructuring Lead & Managing Director
You’re right. It’s 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 as they’re beginning to have stress in their operations.

00;01;03;14 – 00;01;20;26
Rajesh Kothari – Cascade Founder & Managing Director
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. You know, those are always problems that are dire. But you’re saying those are really signs and that’s that’s earlier that I think people think about bringing in a restructuring specialist. Right?

00;01;20;26 – 00;01;43;06
Ron Miller – Cascade Restructuring Lead & Managing Director
Well, we do performance improvement, helping companies that are good. Really be great companies. Right. 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 entrepreneur owners, owners, leaders of businesses to improve their performance.

00;01;43;08 – 00;01;59;01
Rajesh Kothari – Cascade Founder & Managing Director
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 is very different.

00;01;59;04 – 00;02;21;04
Ron Miller – Cascade Restructuring Lead & Managing Director
Where we’ve been entrepreneurs for decades. We’ve sat on the seat that our clients have sat in and experienced the stress or stress 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.

00;02;21;06 – 00;02;33;21
Rajesh Kothari – Cascade Founder & Managing Director
Yeah, because oftentimes I can’t just an executive or an entrepreneur just do this on their own. Why do they why do they need to help? I mean, everybody has good times and bad times, right? Well.

00;02;33;23 – 00;02;56;29
Ron Miller – Cascade Restructuring Lead & Managing Director
They tend to be very myopic, very focused internally on their business and lose sight of what advances new technologies, new processes, new methods are out there that other people are developing. And that’s where we you know, that’s where we see a lot of good performance. And we bring those experiences to our clients.

00;02;57;06 – 00;03;12;11
Rajesh Kothari – Cascade Founder & Managing Director
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.

00;03;12;15 – 00;03;18;02
Ron Miller – Cascade Restructuring Lead & Managing Director
Right? Right. Yes. That goes across all companies and industries and so on.

00;03;18;04 – 00;03;35;12
Rajesh Kothari – Cascade Founder & Managing Director
And so, you know, in other cases, what are we really bringing to the table? What’s the Cascade team really bringing to the table that that entrepreneur or the or the private equity partner that doesn’t have that’s going to help them kind of through these challenges.

00;03;35;15 – 00;04;07;11
Ron Miller – Cascade Restructuring Lead & Managing Director
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 and shareholders, investors look at kind of the top of the organization and don’t understand that much of the if there are performance issues, they come from up from the bottom in the middle of the company and that leadership is an issue.

00;04;07;11 – 00;04;15;25
Ron Miller – Cascade Restructuring Lead & Managing Director
But and an important but there are issues within throughout the company that often challenge performance.

00;04;15;28 – 00;04;34;22
Rajesh Kothari – Cascade Founder & Managing Director
And you often had to be that objective. Third party voice to help shareholders make a transition and part of the leadership team. Or can you talk a little bit about what you’ve had to do there and how that how that’s impacted the companies that we work with?

00;04;34;24 – 00;05;13;09
Ron Miller – Cascade Restructuring Lead & Managing Director
Well, I mean, we’ve we’ve assessed evaluated the entire organization, looked at are the right people in the right seats and are they are they 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.

00;05;13;12 – 00;05;30;04
Rajesh Kothari – Cascade Founder & Managing Director
Yeah, I know that you said in many cases, right, you’re able to use the benchmark that you’re seeing from other organizations to say whether, well, the company has been maybe doing better than they thought when they compared to the competitors in the marketplace.

00;05;30;06 – 00;06;09;08
Ron Miller – Cascade Restructuring Lead & Managing Director
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 they’re surprised that their competitors or others in their space are achieving even greater, greater margins than they are. So we bring a lot of benchmarking experience to them and help them set new goals of performance.

00;06;09;10 – 00;06;23;23
Rajesh Kothari – Cascade Founder & Managing Director
Well, and I know that often a key mantra for our restructuring team is really 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, Right?

00;06;23;23 – 00;06;56;27
Ron Miller – Cascade Restructuring Lead & Managing Director
Right. We work alongside of our client. We say, I do, we do, They do. And and so we began with showing them working alongside the different teams that need help. And and as they develop that experience and and make those changes, we then phase out so we we leave when they have been successful in the transition and and hitting their goals established collectively.

00;06;57;03 – 00;06;59;19
Rajesh Kothari – Cascade Founder & Managing Director
So that’s just a plan right really has.

00;06;59;22 – 00;07;12;18
Ron Miller – Cascade Restructuring Lead & Managing Director
Got to them yeah yeah they are where they are because they have had challenges in executing. We are there to help them execute a new plan.

00;07;12;20 – 00;07;33;28
Rajesh Kothari – Cascade Founder & Managing Director
And sometimes, you know, restructuring and we’re getting called when it’s a crisis. Right? And it’s, it’s, it’s beyond the hey, we’re starting to see the trend and, and the wheels are really coming off the loss of you will and how does that how does our role change there or you know, how does how does the how do people benefit from that?

00;07;34;00 – 00;08;10;27
Ron Miller – Cascade Restructuring Lead & Managing Director
Well, it’s the sooner the better. Obviously, often we we are introduced to a client that if we’ve only been introduced six months earlier, we would have had more options and it would’ve been less of a challenge to to to help them fix their whatever issues that they may have. But there are even if it’s a little late, there are a number of solutions that we’ve been successful in helping our clients through.

00;08;10;29 – 00;08;26;15
Rajesh Kothari – Cascade Founder & Managing Director
So how does that how do the banks because I mean, obviously one of the big drivers in this is lenders, right. Goes away when companies start having trouble. The lenders are the ones that are getting tense and saying, hey, you got to develop a solution. So. So how does the bank benefit from having someone like us involved?

00;08;26;15 – 00;08;55;24
Ron Miller – Cascade Restructuring Lead & Managing Director
And the first thing we do is we help educate our client that their interest and the bank interest are aligned more than they feel they are, are often unhappy with their bank. If their banks, you know, 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.

00;08;56;02 – 00;09;17;00
Ron Miller – Cascade Restructuring Lead & Managing Director
And as I said, their interests are aligned and as as they understand that and they begin to work more cooperatively with the bank and working cooperatively together is, you know, going to achieve much, much better results than in working competitively for it.

00;09;17;07 – 00;09;24;17
Rajesh Kothari – Cascade Founder & Managing Director
Yeah, and for the bank. I mean, so that could mean, you know, maybe some accommodations and some working with the client. Right. As part of that.

00;09;24;17 – 00;10;00;13
Ron Miller – Cascade Restructuring Lead & Managing Director
Right. Right. Well, you know, our job is to really inform the bank of what’s really going on. So we develop a lot of data and we we communicate, communicate, communicate with the bank. And again, because their interests are their interest are in making sure that their their customer is successful, unable to pay them back. Right. So, you know, the information getting to understand exactly what’s going on within the company is is critical.

00;10;00;16 – 00;10;13;18
Rajesh Kothari – Cascade Founder & Managing Director
And so so get it how the bank can benefit. So how does shareholders and executives benefit from call on a third party like us and to really help them when it when it gets when it gets this dire.

00;10;13;20 – 00;10;38;14
Ron Miller – Cascade Restructuring Lead & Managing Director
You know, we introduce change right. Which is which is often a challenge for business owners or business leaders. But it really the benefit because the company stops doing the same old thing and having the same results. Right. So we help them change to help them understand. Typically, the leadership learned a lot about their business with a third party coming in and giving them a different view.

00;10;38;18 – 00;10;42;06
Ron Miller – Cascade Restructuring Lead & Managing Director
Right. And a different skill set.

00;10;42;08 – 00;10;58;22
Rajesh Kothari – Cascade Founder & Managing Director
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 kind of continue their growth. Maybe different dynamics, but. Right. I mean, that ultimately one of the one of the things that we’ve been we’ve been very successful in helping our clients do.

00;10;58;29 – 00;11;34;12
Ron Miller – Cascade Restructuring Lead & Managing Director
It’s one of the options and that and it’s really what is the best outcome for for the for the client and the other stakeholders. Sometimes it’s finding a lender, sometimes it’s buying some additional capital invested, sometimes it’s retained the bank retains the customer because, you know, things have changed, performance has improved and the relationship was improved. So I think that’s a win certainly for the bank.

00;11;34;15 – 00;11;45;11
Ron Miller – Cascade Restructuring Lead & Managing Director
If it can be restored to the credit and it’s a win for the bank, if they are and left no longer want to credit for us to find another bank.

00;11;45;14 – 00;12;11;22
Rajesh Kothari – Cascade Founder & Managing Director
You know, our team has worked across a lot of unique cases, right? I mean, every every one of them is is unique in the circumstances and the things that led up to the the challenges that they’re facing. But what are two a couple of the most common mistakes that you see organizations do when they get into these difficult situations that that makes their their lives more challenging.

00;12;11;24 – 00;12;13;12
Rajesh Kothari – Cascade Founder & Managing Director
If you can limit that to.

00;12;13;15 – 00;12;41;12
Ron Miller – Cascade Restructuring Lead & Managing Director
Limited it to push back. There are lenders that understand, deny that they have issues and performance issues, and they’re not they’re not meeting the expectations of their lender and refusing to change or refusing to take a hard look at what they’ve how they’ve been performing, not being realistic about really where they are.

00;12;41;15 – 00;12;55;23
Rajesh Kothari – Cascade Founder & Managing Director
And the dynamics and what’s what’s the consequences. I mean, what are what do you see the consequences when they stop communicating or challenging their bank, when the when the bank’s got when the bank has concerns or is raising these red flags.

00;12;55;26 – 00;13;11;27
Ron Miller – Cascade Restructuring Lead & Managing Director
The consequences can be losing their business. They need to be you know, they need to be open to to the change and taking on new ideas and again, appreciating the risk that the other stakeholders are in.

00;13;12;00 – 00;13;42;02
Rajesh Kothari – Cascade Founder & Managing Director
And, you know, you said earlier that oftentimes one of the challenges that people have as 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 and how do you work with that? How we work with attorneys when they you know, and they see these dynamics beginning to develop with the client, maybe even before the banks have kind of raised the phrase the real the red flag.

00;13;42;04 – 00;14;19;17
Ron Miller – Cascade Restructuring Lead & Managing Director
Right. Well, it’s you know, they’re trying to prevent, you know, disputes and disagreements, obviously, trying to, you know, identify what the issues are and then disclose them, bring them out, bring them out to the other stakeholders, like we’ve often been the first to, you know, let the bank know that there are issues before they’ve recognized that. So it’s a variety of different situations which we up.

00;14;19;18 – 00;14;47;06
Rajesh Kothari – Cascade Founder & Managing Director
The client Yeah. And I think I’ve seen where you know in some cases you just described or we’re talking to the bank on behalf of the client for the first time and 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 of 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.

00;14;47;07 – 00;15;08;06
Ron Miller – Cascade Restructuring Lead & Managing Director
And we don’t know where the body language exactly, exactly. You know, determine what the issues are, what the solution is, and and come to them with all of it. You know, open up, share the share with them and give them solutions so that we can work positively towards a good outcome.

00;15;08;09 – 00;15;25;15
Rajesh Kothari – Cascade Founder & Managing Director
Well, Ron, I really appreciate you taking the time to chat a little bit more about our restructuring practice and and hopefully give 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 share how we might be able to help your organization.