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Download Cash Relationships Walking into a Turnaround situation… Outcome
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ANATOMY OF A TURNAROUND Ross Ely Boise State EMBA Nov 2016 Setting Priorities Values Employees Customers Value proposition Financial – cash management Financial – profitability Operations & Suppliers Partners & the industry Walking into a Turnaround situation… Survival Actions Cash Relationships Defining the way forward Strategy: Value Proposition & operational alignment Financials: Cash & Profitability Unity: Values & Employees Outcome: A forward strategy & rules of engagement Execution Continuous improvement MicronPC (aka MPC Computers) The industry The company Market dynamics Financials The PC industry circa early 2000s Industry slowing after years of blockbuster growth Vicious competition among large players with undifferentiated products Competitive advantage largely determined by scale and brand Distinct customer segments with different requirements (and acquisition costs) “Dot-com” mania emphasizes growth and scale at any cost Global PC Market Unit Sales (M), 1996 – 2015 Includes desktops, laptops, & notebooks; excludes mobile devices. The company Started in the early 1990s as a spin-off from Micron Technology, became a public company in 1997 Peak revenue of $1.7 billion in 1997 with 2,500 employees, $200 million in cash Direct sales model Customer franchises in consumer, business, education and government The crisis in 2000 As “dot-com” crashes, public markets demand profitability Stock price falls from mid-teens to low single digits Board refocuses the public company on web hosting and classifies the PC business as a “discontinued asset” Private equity firm buys PC business, most cash stays with parent Employees align with either web hosting business or PC business as formal split takes place What are our options? Below is a generic range of options for a company facing financial distress. Time pressure often requires pursuit of multiple options in parallel. Retrench – realign costs & strategy Restructure via Chapter 11 (must still retrench to succeed; bankruptcy may be needed when unable to meet or negotiate obligations) Restructure via Sale / Divest – Sell entire business or divest portion of it Partner. E.g., enter captive agreement to streamline infrastructure Shut Down & Liquidate (On own or via Chapter 7 Bankruptcy)
