M&A Alerts, April 23, 2010

When it comes to turnarounds and corporate restructurings across an array of sectors, one go to guy is William Snyder. Snyder is a Managing Partner at CRG Partners and a Certified Turnaround Professional, who has received numerous distinctions over the years, including being named to Turnarounds & Workouts' 2007 People to Watch list, an honor he shares with 11 professionals nationwide. His executive and entrepreneurial experience spans more than 25 years. Snyder, as an interim executive and advisor, has also participated in the restructuring of more than 70 companies. His recent interim-management engagements include:

Court-appointed examiner of Mirant, a $6.5 billion merchant energy company
CRO of a $7.6 billion integrated poultry company
CRO of a $250 million fire engine and chassis manufacturer
COO of a $200 million furnishing retailer
CEO of a $210 million mattress retailer
CFO of a $250 million building products manufacturer
CFO of a $250 million computer manufacturer
CIO of an $800 million healthcare company
Primary advisor to a $500 million staffing company, a $1.4 billion logistics company and a $2 billion construction contractor.

Snyder, in addition, has served as an interim-officer/Examiner/Trustee in more than 20 bankruptcies and is a frequent speaker and presenter on a wide range of turnaround topics. We asked his take on a series of pertinent questions for turnaround professionals.

M.A.: Operational focus received a lot of press post-crisis, what do you see as the major trends for turnaround success going forward?

W.S.: Moving forward, companies should focus on securing enough resources, such as time, money and people, in order to fix the left hand side of the balance sheet before focusing on correcting the right hand side, which is where many companies go wrong. To do this, you can find bridge financing, which will help secure time, and turnaround firms are a great asset for supplementing skill needs. However, because the majority of the fees to financial advisors are based on success fees, I think that the quick 363 sales trend will continue. Many turnaround firms do not want to touch the top line because it is so uncertain. Most turnaround firms are paid by the hour since they work alongside management and, therefore, most of their fees are not success based.

M.A.: What do you see as the trends in financing going forward and how does that impact your thinking when it comes to the turnaround process?

W.S.: I was told that over 50 finance companies have been or will be formed since the October 2008 meltdown. Given that banks only made 35% of the leverage loans in the past five years, then these finance companies will rise to fill the loss of many hedge funds and CLOs. With all these new funds, financing will ultimately become easier in the future.

M.A.: After purchasing a company through a 363 sale, what elements do you first suggest a parent company or investors look at to ensure a successful turnaround, especially given current market conditions?

W.S.: The people factor. Many times firms, are focused on "synergies” in selling, general and administrative expenses, operations and the like. Therefore, they ignore the complexities of integrating cultures and the acquired company, many times, is "vanquished” and the people and their value just dissipate.

M.A.: How has the supply chain been impacted by the credit fallout?

W.S.: There are far fewer players and many of the surviving ones are severely financially troubled. Less than full load carriers are struggling, and they are many times the life blood of smaller middle market companies. Because there are fewer players, contingency plans are harder to develop despite the fact that rates have dropped significantly and it is easier now to transport and ship. Many of the carriers were rolled up in the past few years and others expanded rapidly with easy credit, which turned out to be a massive burden when the downturn came.

M.A.: Commercial real estate is clearly an issue now and going forward, what can M&A professionals do to take advantage of foreclosures and what are some steps you would take to navigate a turnaround?

W.S.: This commercial real estate downturn is very different than others, especially compared to the crisis in the mid-eighties. Banks are holding onto properties and not dumping them, and if the property managers are doing a good job they are far less likely to pull the rug out from underneath them. So now, buyers of distressed properties are very disappointed, and leveraged owners are getting rides they would have never gotten in the past. Banks are much more willing to extend and delay inevitable losses at this point. In a turnaround, the banks will be more understanding if you are a good steward of the properties and feel that they are better served by existing management. This creates the opportunity of more time which under certain circumstances allows for a better result in a turnaround.

M.A.: Companies in the media sector continue to look vulnerable, what would you suggest some of these companies might do to increase revenue or market share (give any example/scenario)?

W.S.: Media companies are now facing "iPad syndrome.” The iPod was a game changer for the music industry and the iPad will be one for media too. The iPad brings a great, visually rich user experience that will likely drive an increase in digital readers. Therefore, publishers and media companies that embrace new technologies and pay models will be better positioned in the long term. What's interesting is that this phenomenon first occurred with dreadnoughts. At the time no one would embrace steel ships for fear of obsolescing their own navies. Then, once one converted they all had to or else they would perish against the competition.

M.A.: How do you see the future of the telecommunications industry going forward? Will there be more consolidation, for example, or do you think new innovative companies will lift the industry?

W.S.: I believe the backbone providers will consolidate and there will continue to be a massive proliferation of content and user equipment providers. Many of the large cell phone providers and the like are currently struggling, and that will continue as capital needs explode to meet the growing needs of users.

M.A.: Finally, what do you attribute CRG Partners' success to?

W.S.: We are a middle market focused consulting company that is committed to clients first. You hear this a lot, but what makes us different is that we don't try to be everything to everyone. By focusing on always delivering maximum value to our clients, we attract professionals with a common purpose and everyone from our newest hires to our oldest clients is familiar with our core values.

M.A.: Thanks William.