Turnaround Strategy

1. Interim Management
For
Business Restructuring

2. Turnaround Strategy
• What is Turnaround?
– Higher costs of wages and raw material
– Decreased demand that can be the result of temporary demands dips
(such a lost contract)
– Strikes of employees
– Management problems
– Decreasing profitability
– Lost financial control
– Increasing dependence on debt
– Failure to reinvest equity in the business
– Lack of proper planning
– Inflexible chief execuGve
– Management succession problems

3. Factors for the Corporate Decline #1
• Financial Control – No adequate control on cash
inflow and ouJlow, dose not know which product
or project is loosing, why it is losing?
• Ineffec@ve Management:
– One man rule: All power is concentrated in the CEO
– Combined ArGst and Chief ExecuGve – it weakens not
only the process of execuGve but also effecGve
monitoring and controlling system
– IneffecGve Board of Directors – most members of
Board are merely rubber
• Compe@tors?

4. Factors for the Corporate Decline #2
• High Cost Structure:
– Company’s liabiliGes to take advantage of economics of
scale of producGon
– Under – uGlizaGon of capacity owning to lack of demanded
or ill - maintenance of producGon machinery and
– Other operaGng inefficiencies
• Big profits of a project – undertake big projects
without the resources or experGse to manage
• Irra@onal financial policy:
– High debt (equity raGo)
– Use of inappropriate financial sources
– Inappropriate cash management

5. A Typical of Turnaround Process

6. General Strategies
New management and organiza/onal change and decentraliza/on – improve
financial control, and decentraliza/on:
– Revenue increase strategy
• If the firm is operaGng “substanGally” but not extremely
below the brake-event point, the appropriate strategy will
be one which generates extra revenues
– Cost-cuJng strategy
• For sick unit operaGon much belong the brake-event point
firm may reduce its average cost by reducGon fixed cost
– Combina@on
• This may be possible though sGmulaGng product demented
through promoGonal efforts or reducGon the quality of the
product

7. Approach - Basic Objec@ves
Objec/ve Problem
• Distressed,
underperforming company
• Financial drain on owners
and lenders
• Cannot a]ract financing
or find an investor
• CompeGGvely-posiGoned
enterprise
• Efficient operaGon with
growing earnings and
posiGve cash flow
• Sale of company to new
investors or strategic partner

8. Approach - AMacking the Problem
Approach
• Expert planning followed by
aggressive implementa/on
• Not “consulGng”: we create and
manage real change.
Capabili@es
• Proven methodologies
• MulG-lingual, mulG-cultural staffing
• Experienced internaGonal industry
specialists
• Numbers, MIS -driven
Exit Connec@ons
• Investor contacts
• RelaGonships with M&A firms
Under-
performance
Recovery,
Growth,
Investment

9. Approach - Typical Engagement Characteris@cs
Se-Ma-For will install the Management Team to design and implement change in underperforming
Management Team consists of all or some of
the following:
+ Current Board members: CEO, CMO, and
CFO, and
+ External (Interim) consultants:
• Financial consultant, and
• Short-term industry specialist
consultants (eg. HR specialist*)
Typical Fee Structure consists of:
+ 2-phase monthly base retainer:
• Partly covering consults‘ costs in
iniGal assessment and
implementaGon phases
+ 3-part success fee, based on:
• Achievement of monthly financial
projecGons during implementaGon
phase of financial restructuring
Assignments typically last 6-9 months, full-/me in the company.
HR specialist will plan to proacGvely idenGfy both current and future HR requirements, as well as
potenGal challenges in order for achieve the strategic objecGves.

10. Approach - Value of Interim Management
The Interim Management approach offers several cri/cal benefits to client companies and their
owners.
• Quick, effec@ve ac@on, instead of waiGng for
consultants to develop a plan for others to implement
• Transparency for owners and other stakeholders
• Credibility with lenders, facilitaGng financial
restructuring
• Iden@fica@on and training of capable permanent
management
• Confidence with prospecGve new investors, to
facilitate sale of the company

11. Approach - Business Restructuring Process
Stabilize Company,
Set Winning
Strategy
Rationalize Debt-
Equity Structure
Create Essential
Functional
Capabilities
Attract New Capital
and Owners
• Cost reduction
• Liquidity generation
• Product line
rationalization
• Asset utilization
improvement
• Reorganization
• Competitive
positioning
• Liquidity
management
• Balance sheet
restructuring
• Working capital
refinancing
• Bank debt workout
negotiations
• Strategic action
planning
• Organizational and
personnel
development
• Marketing and sales
• Financial planning
and MIS
• Business process
re-engineering
• Business plan
preparation
• Value enhancement
• Company valuation
• Assistance in
investor search
• Advocacy in
investor / strategic
buyer negotiations
Turnaround
Management
Financial
Restructuring
Performance
Improvement
Re-capitalizaGon
Full turnaround program has four stages, implemented through “parallel tasking”