Masterclass: Corporate turnaround

Markets recover, even from the worst recessions. Is it time to get those turnaround strategies in place?

Last Updated: 09 Oct 2013

What is it?

'Buy when there is blood in the streets,' advised Baron Philippe de Rothschild. He was alluding to the fact that economies and markets recover, even from the worst recessions. Firms can be turned round too. That is the good news. The tougher part is taking the necessary measures that will make recovery possible. These have to do with cutting costs and getting real about future revenue streams, but also taking calculated risks on levels of future demand. This is a good time to start getting those turnaround strategies in place.

Where did it come from?

Few companies last for ever. Those that have survived for several decades have almost all come back from near-death experiences. Rolls-Royce, Britain's great engineering champion, was saved by Edward Heath's government in the early 1970s. Many British banks have had to be bailed out before, or have lost fortunes in the developing world. The most famous turnaround of recent years took place at computer giant IBM. Taking over in 1993, CEO Lou Gerstner declared: 'The last thing IBM needs now is a vision.'

Where is it going? Turnaround experts are going to be very busy in 2009. The credit crunch has deprived many weaker businesses of regular funding streams. The financial tide has gone out and, as Warren Buffett says, now we will get to see who has been swimming naked. Consultancy AlixPartners, which knows about this sort of thing, says nearly half the European firms needing debt restructuring over the next year will be in the UK. It's bye-bye to fat expenses, failing subsidiaries, obsolete products and underperforming colleagues. Just one question: why did we wait until now to deal with such things?

Fad quotient (out of 10):

Nine and going up, sadly.

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