By Marcio Moerbeck, Vice President - Americas Marketing, Datasite
On April 30, we hosted a panel of C-Level executives where the topics of restructuring and strategic alternatives in the face of the global pandemic were discussed. Read their insights below and for an on-demand replay of the webinar click here.
In the last several weeks, every sector of the economy has seen major disruption. Take a global pandemic, add a shock to oil prices, and you have a recipe for entire industries looking for answers.
If you’re a corp dev executive, advisor or other stakeholder trying to navigate this volatility, you’re likely weighing your options to respond. You’re also probably dealing with long days and high stress. Know this: you’re not alone. Others have been through high-stakes restructuring processes in the past and come out the other side. Last month, we assembled a panel of them for our “Navigating the Storm” webinar:
These experts are leaders in the oil and gas sector—where volatility often comes with the territory. But, no matter what industry you’re in, the insights our panelists have amassed and the practical advice they offer will most definitely apply. Here are some of the biggest lessons I took from their stories.
Be ready to delegate.
Our panelists (and participating dealmakers) agreed that, when exploring restructuring, the CEO must lead the charge. As Aaron Skidmore noted though, you never know what might happen. You could have turnover. A CEO might be asked to leave during the process. So, having a two-deep bench for that leadership spot—people who really understand the company and the stakes—is a good idea.
In all cases, the task is too big for one person. Kyle Mork recalled interacting with 10 constituents at a time. He stressed the importance of structuring who handles what. For instance, the CEO may focus on communicating with employees and the board, while the CFO fields data requests.
At the same time, panelists recommend maintaining a kind of firewall between the people living and breathing restructuring, and those handling day-to-day business operations. You can’t afford to have employees feel like no one is in control.
Assemble the right team.
Bert Ferrara noted that advisors fall into three buckets: legal, financial and restructuring. But he cautioned that restructuring can differ significantly from other instances of running a legal department. In most scenarios, he prefers to choose firms with specialized expertise for narrow engagements. But a bankruptcy process is so all-encompassing—finance, commercial contracts, securities law, corporate governance—it just makes life easier when you can use one firm for everything.
All panelists agreed it’s critical to work with respected experts in this field. Restructuring is a small, highly specialized world. You want people with established relationships and credibility.
Thirteen is your lucky number.
Panelists and dealmakers varied on how far ahead people should plan during this process. A majority of our webinar participants said they were looking out six months or even a year. But, Ryan Midgett emphasized the value of 13-week cash flow forecasting. He and our panelists argued that timeframe—about three months—is ideal for lining up notifications, board meetings, important decisions, data room preparations.
The panel also stressed the importance of tying that forecast to your financial models. Cash flow can get volatile, and it will be one of the first things banks and advisors request.
Good communication is critical.
Our panelists advocate extreme transparency, without sugar-coating. Kyle Mork also recalled one early mistake: assuming information he shared with a subcommittee would get back to the full board. He emphasized that you may be thinking about this 24/7, but board members probably aren’t. Make sure you’re constantly reframing: “Last time we talked about X. Here’s what’s happened since then.”
Aaron Skidmore recommended making a list of all the different parties and their preferences. Knowing who wants more live time and frequent updates will help you prevent fires rather than trying to put them out.
Panelists also advocate as much transparency as possible with employees—even when you don’t know all the answers. If you don’t provide information, employees will fill that void with their own ideas.
Use the opportunity.
It may sound intuitive, but our panelists stressed the importance of using this process to really focus on the long-term health of the business. Always fight for lower debt and a balance sheet that gives you flexibility on the other side. Panelists cautioned from firsthand experience: two bankruptcies is almost always more expensive than one longer one.
Take care of yourself.
One area where our panelists were in lockstep: the personal toll this process can take. The panelists called restructuring one of the most intense experiences of their careers. Running nonstop for months, you have to take time out to focus on your own health and well-being.
Our panelists also recommend trying hard to not take things personally. People are going to be unhappy, sometimes angry. Try to stick to the facts and always maintain your integrity. Assume that anything you put together will get a lot of scrutiny. When you look back on this in a year, you want to be satisfied with how you handled things.