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Business Restructuring and Turnaround Management
Stefan Bucataru
Veldtster Management & Consulting
We have a special co-operation with one of Romania’s leading Turnaround companies to work together on Restructuring and Turnaround projects. Osprey & Veldtster work in bringing clients the best knowledge and deep practical experience.
Stefan founded Veldtster Management & Consulting and built a solid record of achievement by leading private equity investments and turnaround management projects in Central and Eastern Europe. His industry experience encompasses private equity (Global Finance, Romania & Moldova Direct Fund), retailing (La Fourmi), manufacturing of building materials (Lasselsberger GmbH, Sanex S.A.), beverages (South African Breweries), logistics (DHL International), consumer goods (Colgate-Palmolive), dairy products (Friesland-Coberco), as well as large-scale industrial projects (Cernavoda Nuclear Power Station). Stefan holds an MBA from Durham University and is a graduate in Mechanical Engineering. He is also a Certified Management Consultant (Canadian Association of Management Consultants), a Chartered Marketer (Chartered Institute of Marketing) and a member of the Turnaround Management Association (Chicago). Stefan speaks native Romanian, fluent English and good French.
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Key success factors:
Our intervention is:
 Comprehensive: focused on shareholder value, aimed at strategically re-aligning the company to its environment
Hands-on: focused on implementation (not on advice), delivered by management teams with proven track record, asuming overall control over the restructuring process
Immediate: expertise is deployed by way of replacing or completing existing management |
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Multidisciplinary, hands-on approach
In the current environment companies require rapid adjustment to fast and complex changing conditions. The credit crunch, rising input costs and declining consumer spending, at a pace and reach never before experienced by the international business community, forces companies to look inside their businesses to find dramatic ways, across all functions, to reorganize processes, reduce costs, preserve cash and pay down debt.
The Team possesses in-depth experience across a range of sectors and has developed specific skills to deal with the complex challenges of delivering comprehensive restructuring programs, under time-sensitive conditions, aimed at preserving and maximising shareholder value.
Our rapid response capability is based on a broad range of functional and sectoral expertise readily available for deployment within client organisations via interim board and management solutions. Distressed companies (severely underperforming or facing bankruptcy) require immediate intervention. At times of intense pressure, our approach is hands-on and our project teams include expertise (i.e. restructuring, business performance, corporate finance, mergers, acquisitions and divestitures) which goes beyond the capabilities of traditional management teams (i.e. commercial, operational, financial management).
Most importantly we do not offer advice: our crews of specialists directly assume control over the turnaround process, initiate change in parallel to evaluating circumstances and stabilize the company protecting its assets, maximising shareholder value and steering it towards operational and financial performance.
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Key benefits:
Stakeholder agreement on facts – achievement of common understanding of status quo among shareholders, lenders and company
Alignment of business strategy to external conditions, internal resources and shareholder objectives
Alignment of management program focused on strategy and objectives
Alignment of investment and cost reduction programs
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Strategy adjustment to changing circumstances and shareholder objectives
Underperforming companies, especially as a result of rapidly deteriorating macro-economics, often experience a sudden inability to adjust objectives, re-define strategy and protect shareholder value. As an essential pre-requisite to any restructuring program, the various components of strategy receive a quick reality check in terms of alignment with shareholder objectives, relevance with external constraints and consistency with internal resources.
Main steps:
Management change – Success or failure of the entire process depends on solid performance at this stage. Existing management even willing to take steps to turn things around often lack credibility, being perceived as part of the problem. Experienced turnaround professionals should be brought in to offer advice, or become part of the management team or board of directors.
Evaluation and emergency action – is fact finding and assessing the extent of the company’s problems. A preliminary action plan addressing the most pressing problems is developed. This should be a strategic plan identifying core business, bridge finance and adequate organisational skills and resources. The objective is to control cash and make strategic cost cutting decisions.
Stabilisation – following emergency action, turnaround effort needs to be directed towards making remaining operations effective and efficient. Further restructuring is often necessary.
Normalisation – the focus is on profitability, return-on-equity and enhancing shareholder value. Financially, the emphasis shifts from cash flow concerns to consolidating a strong balance sheet, long-term financing and implementation of strategic accounting and control systems
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Key benefits:
Turnover maximisation
Margin improvements
Optimal HR resources
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Commercial restructuring
Financial underperformance is often the result of a series of shortcomings concerning product portfolio, pricing strategy, supplier compensation policy, marketing and promotional programs. Alignment with strategy and close coordination with operations and finance are key success factors.
Main steps:
Commercial function diagnostic and restructuring (capability to deliver strategy)
Product portfolio analysis and supplier base optimisation (alignment with strategy)
Commercial policy analysis (alignment with strategy)
Pricing policy analysis (alignment with strategy)
Branding, corporate identity and marketing program analysis (alignment with strategy)
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Key benefits:
Optimisation of processes
Rapid and significant cost reductions
Release of untilised reserves of cash
Alignment with commercial strategy
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Operational restructuring
Financial underperformance is often the result of an imbalance between the overall size of the business and its operational capacity. High fixed costs, excessive headcount, inadequate levels of inventories, inappropriate processes and controls quickly turn profits into losses when consumer spending tightens and business financing costs become prohibitive. Alignment with strategy and close coordination with commercial and finance management are key success factors.
Main steps:
Operations function diagnostic and restructuring (capability to deliver strategy)
Supply chain analysis and supply chain optimisation
Store layout analysis (alignment with commercial)
Regulatory compliance analysis
Process flow analysis and process optimisation
Inventory analysis and optimisation
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Key benefits:
Optimisation of business financing
Improved forecasting, earlier awareness of cash requirements
Effective cash management
Improved business processes
Superior decision making
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Financial restructuring
Financial underperformance can be the result of sub-optimal capital structures, inadequate working capital and capital expenditure financing, inappropriate performance monitoring and reporting, insufficient forecasting and liquidity management.
Main steps:
Finance function diagnostic and restructuring
Business financing analysis and restructuring
Budget process analysis and improvement
Cash forecasting and liquidity management
Cost analysis and cost reduction
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Key benefits:
Higher valuation
Easier sale process
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Corporate Governance
Key elements of good corporate governance principles: honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization can often get into disarray when a company finds itself in a distressed situation. In addition weak corporate governance can itself be a key reason for underperformance particularly in emerging markets with a tradition of strong “centralistic” management. We tackle corporate governance right from the start with our team members taking responsibility for the company’s performance, by setting up transparent management reporting systems fast and encouraging a culture of openness.
As part of the Corporate Governance restructuring we check for existence and create if not present or improve if present:
Main steps:
Structure to observe rights for all shareholders
Structure/mechanism to recognise other stakeholder obligations
Appropriate delegated responsibility structure to Directors and officers of the company (unitary or dual board) according to local legal environment
Code of conduct & Ethics
Clear roles and responsibilities of Directors and Senior Management
Independent verification of financial reporting (audit)
Internal Control
Compensation setting and review for Directors and Senior Management
Nomination and Selection of Directors and Senior Management
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Track Record : Case Studies
La Fourmi
La Fourmi was the first international supermarket chain started in Bucharest in the early 90’ by a group of Lebanese investors. Right from the beginning La Fourmi established itself as the premiere food retailing outlet, taking full advantage of lack of competition and introducing a wide range of imported products. The chain grew rapidly to 11 outlets, but the original owners’ lack of adequate financial and management resources and the rapid move into the market of strong international retailers had its toll on the company’s financial position. In 2005 La Fourmi’s majority interest was acquired by private equity investors and a number of Veldtster professional were called upon to assume a leadership role, at Board and Senior Management level, in restructuring the company’s operations and elaborate an appropriate development strategy. Over two and a half years the company’s product portfolio of revamped and focused on fresh products and ready-made meals, outlets were renovated and layouts were modified in line with new product portfolio and numerous business processes were modified and new ones introduced, including an ERP. Turnover grew from €15 million to €30 million, the number of outlets reached 14, all in Bucharest, two leased outlets were acquired and the company’s value improved by more than 3 times. In 2008 La Fourmi was successfully sold to strategic international player Delhaize “Le Lion” Group.
Artima
Artima was founded in 2001 by Florentin Banu and Vlad Ardeleanu who developed it into the largest privately owned supermarket chain in Romania in less than five years. Strategically oriented to the second tier cities in the region, as to avoid initial competition from international retailers, Artima swiftly secured excellent locations, leveraging its „first mover” advantage. Relatively large supermarket concept (approx. 1000sqm) blended with lack of third-party real estate developers, generated substantial entry capital requirements. In spite of its red P&L and adverse market conditions, Artima successfully increased equity in the first two years of operations with three international private equity investors. Leveraging on scale, EBITDA became positive in the third year, validating the venture into success in 2004. The company was successfully sold to private equity investors in 2006 and Osprey Partners advised on the sale. |
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