Principles of Corporate Renewal, Second Edition

Preface

Preface Listening to Erich Mundinger, a vice president at American Finasco, tell the following story helped me to realize how misinformed mainstream America is about the study of corporate renewal: After explaining to the dean of a prominent college of business administration about his work with companies in financial distress, the following day he received an unexpected call from the chairman of the University's School of Psychiatry. The doctor inquired in an anxious voice if "he needed assistance treating his suicidal clients." If nothing else, this book should introduce members of the academy and their students to a new field of study. It also should outfit students to restore troubled companies. Since 1988, when I began to teach corporate renewal to business students and executives, I have learned to start each class by reciting the one ground rule for class discussion: "Express your views about any topic in any way but never ask me or a fellow student the unfair question , "What if it was you?" Layoffs, cutbacks, downsizing, severance benefits, and related topics are associated with human suffering and misery and invariably elicit the unfair question unless the rule is enacted. There is no satisfactory answer to the question. Although the human tragedy produced by layoffs is an important social issue, it diverts attention from the equally valid corporate renewal issue of whether the company and some of its jobs can be saved. I advise readers of this book to keep an open mind and avoid the diffidence that leads to inaction and eventual failure. An equally contentious but, in my opinion, more valid question is, "What if it was your family's small business?" Corporate renewal is an old profession in a new garb. Resourceful entrepreneurs have always stood ready to acquire failed businesses and inject new money or ideas in an effort to transform detritus into treasure . Today the corporate renewal specialist no longer works or invests xx Preface for him/herself but probably is an employee of a large consulting firm or a Big Four accounting firm. Factors responsible for this dramatic shift include the protection provided to debtors through modern bankruptcy laws and bankers' and other secured lenders' recognition that turnaround professionals can help them recover problem loans. In the past decade, courses on corporate renewal have emerged at prominent business schools, though each campus's course catalogue coins its own title, for example, Corporate Renewal, Turnaround Management , or Corporate Restructuring. Schools now are contemplating master's degrees in corporate renewal. Moreover, practitioners now earn a certificate from the Turnaround Management Association, the Certified Turnaround Professional (CTP) designation similar to the CPA or CMA designation in accounting, that documents their competency in management, finance, accounting, tax, and legal issues pertaining to corporate renewal. This book, the first tome on corporate renewal, attempts to assemble and codify the topic's myriad issues. Some might prefer a different collection of topics or an emphasis on different issues, but hopefully there is enough common ground in this volume to satisfy everyone. I want to thank the many turnaround managers and related professionals who have helped me to understand their fascinating world: Tom Allison, Gary Brooks, Ken Glass, Jack Stone, Baker Smith, Clyde Hamstreet, Dave Ferrari, Judge Paul W. Glennon, Sheldon Solow, Margaret Howard, Katherine Heidt, Grant Newton, Chuck Hofer, Robert Weisberg, Edward P. Collins, Les Brown, Barry Evans, Nikesh Arora, Vinesh Kochhar, Chris Ryan, Rick Mikels, Karen Mills, Carol Smith, Martha Kopatz, Dick Gorges, Shaun Donnellan, Greg Frasier, Amin Khoury, Brad Yount, Don Bibeault, Carl Youngman, Tom Hays, Lee Goldberg, Gerry Sherman, Alan Cohen, Bill Bruns, Michael Segal and many others too numerous to mention. lowe a special debt of gratitude to Bob Lehmann, a former student now at Fidelity Investments, who helped me prepare the financial tables for the Global Foods Case. Also to Chris Ioannides, who worked on the Global tables at the last minute. I am grateful to the many students who read an early draft and found errors. And to Ellen McCarthy and Tanis Furst at the University of Michigan Press, who creatively and diligently helped me to shape the book. More recently, Frank G. Conrad, a former bankruptcy judge, helped me revise the bankruptcy law chapter, for which I am grateful. ...