Professional Documents
Culture Documents
Corporate Turnarounds
and Restructuring
AGIG Seminar
Booz & Company is the oldest and youngest global management consulting firm
96 years of consulting
experience (founded 1914)
Europe
North America
Atlanta
Chicago
Cleveland
Dallas
Detroit
Florham Park
Houston
Los Angeles
McLean
Mexico City
New York City
Parsippany
San Francisco
Amsterdam
Berlin
Copenhagen
Dublin
Dsseldorf
Frankfurt
Helsinki
Istanbul
South America
Buenos Aires
Rio de Janeiro
Santiago
So Paulo
London
Madrid
Milan
Moscow
Munich
Oslo
Paris
Middle East
Rome
Stockholm
Stuttgart
Vienna
Warsaw
Zurich
Abu Dhabi
Beirut
Cairo
Dubai
Doha
Riyadh
Beijing
Delhi
Hong Kong
Mumbai
Seoul
Shanghai
Taipei
Tokyo
Pacific
Adelaide
Auckland
Bangkok
Brisbane
Canberra
Jakarta
Kuala Lumpur
Melbourne
Sydney
Mergers &
Restructuring
Marketing &
Sales
Product &
Service Innovation
Information
Technology
Operations &
Logistics
Organization &
Change
Outsourcing
Industry Sectors
Aerospace
Automotive & Industrials
Chemicals
Consumer Products
Energy & Utilities, Oil & Gas
Financial Services
Health
Media & Entertainment
Natural Resources
NGOs, Nonprofits &
Associations
Private Equity
Retail
Technology
Telecommunications
Transportation
3
Focusing on Results
For our clients, success is measured
by results
World Economy
Source: Bloomberg
Booz & Company
24 November 2010
Risk of Bankruptcy
Liquidity
Crisis
Profit
Crisis
Strategic
Crisis
Low
Low
High
Low
Scope of Action
Bankruptcy
High
Comments
Three main types of company crises
usually build upon each other
Strategic crises characterized by
lack of long-term success factors
Profit crises may deplete equity
over time and lead to excessive
indebtedness
Strategic
Crisis
Profit
Crisis
Liquidity
Crisis
Booz & Company
24 November 2010
EXAMPLE
Exogenous Factors
Market saturation
FX fluctuations, fiscal policy
Political or military crisis
Catastrophes
In typical restructuring situations there is an urgent requirement to change business within a short time horizon to ensure
survival
Annual Revenue Projection
-8,2%
Revenues
EBIT
-44,9%
+2%
+25%
+16% +9%
+11% +7%
Target
EBIT
EBIT
Projection
Weekly Cash Projection
Cash
Urgency in Restructurings
Restructurings require quick action to
resolve threatening business situations that could cease continuity of
operations or terminate independence
Typical drivers of urgency in restructuring programs
Massive decline in sales
Significant gap to target EBIT
Liquidity crisis
Urgency of situation requires rapid
decision-making to resolve business
risks
Quick definition of improvement
targets
Compact phases & decision points
Quick-wins identified and addressed
Fast implementation of project findings
9
10
83%
76%
74%
72%
65%
64%
54%
34%
11
Combined Approach
12
Secure Liquidity
Improve Performance
Improvement of business on
lower level allows planning
and implementation of
sustainable performance
enhancement
Typical
Actions
Focus: Liquidity
Bottom-up actions
Sustainable cost cutting
Proactive measures
Ensure profitability growth
Focus:
Sustainable Improvement
Position
Strategy redefinition and
leverage of improved
capabilities to aggressively
determine own position in the
industry
Focus: Growth
13
Risk
Management
Investor Mgmt/
Share Price
Protection
Supply Base
Labour Cost
Network
Restructuring/
Management
Optimisation
Sourcing
Operations/
Process
Improvement
(Inc. Lean,
R&D, IT)
Overhead
Reduction
Funding and
Capital
Management
Working
Capital
Reduction
Consumer
Insight
Customer,
Brand and
Product
Portfolio
Optimisation
Pricing
Making it
Happen
Leadership
and
Programme
Management
Stakeholder
Management
Inc Crisis
Governance
Model
Change
Management
Strategy &
Operating
Model
Industry
Structure and
Competitor
Dynamics
Business/
Strategy
Review
Corporate
Capability
Driven
Strategy
Review
Revenue
Protection &
Growth
Enablers
Improvement Activities
Focus Area
Sales Force
Marketing
Effectiveness Effectiveness
and Efficiency and Efficiency
Talent
Management/
Retention
Performance
Management
M&A/PMI,
Target
Alliances And
Operating
Partnerships Model (Inc. IT)
14
II
III
Improve Performance
Purchasing/Sourcing
P1 Safeguard Suppliers
P2 Reduce Material Cost
Secure Liquidity
L1 Reduce Capital Expenditures
L2 Secure Funding/Credit Line/
Government Support
Adjust Staffing Levels/
L3
Labor Cost
Operational
Engineering/Manufacturing
P4 Incr. Engineering Efficiency,
Quality and Maturity
P5 Design to Cost/Variant Mgmt.
L3
Secure Liquidity
II
Improve Performance
Plan Staffing
Adjustments
Plan Labor Cost
Adjustments
Plan capacity reduction to
meet requirements, e.g.
address
... external temporary work
capacity per head
... internal number of staff
Adjust labor cost to meet
cash savings target, e.g.:
Adjust bonuses
Re-base salaries (where
possible)
Link compensation to
company/turnaround
performance
Implementation
16
L3
Secure Liquidity
II
Improve Performance
Labour Hours
Salary and
Benefits
EXAMPLES
Tight wage and salary negotiations (reduce, delay increase, alternative tariff)
Stopping of voluntary benefits
Reduction in personnel related cost (e.g. company cars)
Work Models
II
Secure Liquidity
Improve Performance
L3
CLIENT EXAMPLE
Before Engineering Structure
VP
Layer 1
5 Product Directors
Layer 2
4.8:1
21
3 Sr. Mgr. Lvl
Sr. Managers. Ind. Cont.
Layer 3
5.4:1
62 Managers
7.9:1
Layer 4
Layer 5
II
Secure Liquidity
L3
Improve Performance
CLIENT EXAMPLE
After Engineering Structure
VP
Layer 1
Layer 2
8.4:1
42 Sr. Managers/Managers
Layer 3
10:1
3 Sr. Mgr Lvl. IC, 21 Mgr, Lvl,
IC 401 Individual Contributors
Layer 4
Secure Liquidity
II
Improve Performance
Secure Liquidity
Identify Outsourcing
Candidates
2
Choose Model
2. Supply Base
Maturity Filter
3. Process Maturity
Filter
4. Capability and
Economics Filter
5. Risk Management
Filter
Outsourcing
Ready Processes
Business
Processes
1. Competitive
Advantage Filter
Third Party
Company
L7
OutNearsourcing shoring
Offshoring
InOffshore Captive
sourcing
Home
Country,
e.g. US,
UK,
Germany
Nearshore:
Canada,
Mexico,
Costa Rica,
Hungary,
Ireland
Offshore:
India,
China,
Eastern
Europe
Business case
Trade-off between short term
cash and long term benefits
might be different than a year ago
(increasing focus on cash now)
Good future perspective
Note on In-Sourcing:
If free capacity is available inhouse also in-sourcing could
have a positive cash impact
Reduction of service fees
Utilization of over capacity
However, in-sourcing only
possible if termination of
external vendor contract is
possible without significant extra
cost
20
P3
II
Secure Liquidity
Improve Performance
Human
Resources
IT
Office & ComNPR
munications
Goods
and
Marketing &
Sales
Sevices
Logistics &
Distribution
Production/
Development
Professional
Services
Quick win initiatives
Booz & Company
24 November 2010
2 Rapid sourcing
Negotiate,
select
suppliers
Evaluate
market
situation/
benchmark
Prepare,
submit and
evaluate
RFQs
Negotiate,
select
suppliers
Supplier
short
listing
Supplier
assessment
RFQ
process
Analysis
Finaliof offers & zation of
negotia- sourcing
tions
strategy
Order of
samples
AssessProposal
ment of Workshops
for
joint
with
process
supply
suppliers
change
chains
Risk
assessment
Internal
change
request
Process
change in
serial
product.
Demand levers
Assessment Workshops
of technical
with
specification suppliers
Design
of proposed
change
Risk
assessment
RFQ/
negotiations
Internal
change
request
Sample
order
Testing
21
II
Secure Liquidity
Improve Performance
B Improve Performance
P6
Factor costs
Tariffs
Inherent
Costs
Location
Economics
Complexity
Scale/
Utilization
B
Manufacturing
Strategy
Supply Chain
Structure
Structural
Costs
Plant
Focus
Service &
Supply
Policies
Sales/operations
planning
Demand planning
Capacity planning
Inventory planning
Tactical
Planning
Processes
Freight costs
Product weight and
volume
Number of suppliers
Sourcing
Supp. mission & roles
Strategy
Supplier economics
Size
Customer
Demographics Location
Density
Distribution
Economics
A
Plant
Process
Process
Technology
C
Supply Chain
Control
Architecture
Motivation
Systemic
Costs
System
Support &
Architecture
Realized
Costs
Compensation
Business
Processes
Complexity
System support
Size of organization
Enabling
Infrastructure Location
Productivity
22
II
Secure Liquidity
S2
Improve Performance
EXAMPLE
Site #2
Site #7
Site #5
European
HQ
Site #3
Low-cost
Site #6
Site #8
The European
Centre
Other
Indian partner
5%
Site #9
Site #2
Site #1
Site #7
Site #4
Site #10
Sister
Engineering
Centre
Indian partner
26%
Target State
Site #9
Customer
Liaison
Site #4
HC
split
Consolidated Sites
70%
45%
European Front
Office
Centre of
Competence
4%
50%
European
HQ
Site #1
HC
split
Low-cost
Satellites
Status Quo
23
24
Board of Management
Interest in short-/medium-term KPI
improvements
Members from different functional
areas might have different interests
Communicate steadily
Customers/Distribution Partners
Focus on sustained quality and
supply stability
Might demand share of margin
improvements
Involve where
necessary
Restructuring
Program
Involve strategic
suppliers early
Suppliers
Suppliers are key to achieve cost
savings
Potentially interested in strategic
alliances of driving supplier
industry consolidation
Workers Council/Employees
Workers Council typically skeptical on efficiency and redundancies with given political mandates
Employees fear consequences for
position and career path
Involve as
needed
Government/Public
Multitude of public stakeholders
exist
Generally critical about restructurings due to potential redundancies
Federal/state governments might
contribute but will ask for participation in decision-making
25
Fairness
opinion
Implementation
controlling
Communication strategy
Communication
Negotiation strategy
Financing strategy
Bank negotiation
M&A
Timeline
Booz & Company
24 November 2010
26
Implement Solutions
Diagnostics &
Target Setting
Program
Design
Initiative 2
Blueprinting
Implementation
Managing
Change
Initiative n
Design measures
Develop
implementation
plans and roll-out
actions
Track progress
continuously
Launch
communications
Train and certify staff
Implement processes
and systems
Develop KPIs
Flip the switch
27
Line Organization
Workstream 2
Client staff
Client staff
Project manager Project manager
and consultants,
and consultants,
Booz & Company
Booz & Company
Business Unit 1
Business Unit 2
Region A
Implements BU
Implements BU
Implements
efficienc. measures efficienc. measures regional efficiency
Engage in cross
Engage in cross
measures
BU opport. identific. BU opport. identific.
Workstream 1
Country Org
Additional
workstreams as
required
Engineering
Production
Sales
Implements
sales efficiency
measures
28
29
JOERG KRINGS
Vice President
30