Turning a business round, be it as an adviser or a specialist investor, is a difficult job - and one made more so every time a failed business falls under the media and political spotlight. David Prossser looks at how hard graft can get businesses back on track.
We understand that not all businesses will succeed, and when they do not, they need skill, courage and capital to give them the time necessary to review options, take advice from others and turn around their fortunes,” so said Lord Digby Jones at the Institute for Turnaround’s 2014 national conference.
Welcome as the UK’s economic recovery of the past two years has been, it is fair to say that corporate UK endured a much less punishing recession than many originally feared. Statistics from the Insolvency Service show that company liquidations spiked immediately after the financial crisis, remained flat for four years, then fell sharply last year. There were 14,040 company liquidations in 2014, down 6.3% on 2013 and the lowest total since 2007.
There could be many reasons for these statistics. Leaner and more agile businesses generally than in the recession of the early 90s? Technological innovation helping businesses drive efficiencies into their operations? Low interest rates, giving businesses greater ability to service debt? But perhaps there is another place to give credit – turnaround specialists, who have nursed so many businesses back to health.
The collapse of City Link in December resulted in Better Capital founder Jon Moulton appearing before two government select committees. It is important government understands what turnaround investors do, not just why failures occurred. Turnarounds have proved a vital part of the corporate landscape through the recession. So, how are they approached?
“We’re looking for something we believe is worth putting the effort into,” says Paul Cartwright, managing partner of private equity firm Rutland Partners. “We want businesses we believe will be assets people really want to own once we’ve worked with them. Our job is to understand the difficulties currently confronting the business, and how they can be tackled.”
In November 2012, Rutland Partners invested in Pizza Hut’s UK business, pledging between £20m and £30m of support for its £60m refurbishment plans. The aim was to reposition the restaurant chain, which had become a tired brand in a very dynamic sector – the UK high street. The revamp started this year. Its London restaurants turned into American diners – some have even had cocktail bars added in the Strand branch.
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