Buying distressed/turnaround companies
Does anyone have experience buying distressed/turnaround companies?
Any good books, websites, etc?
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by a searcher
from Northwestern University
in Melbourne, FL, USA
in Melbourne, FL, USA
6yrs ago
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by a searcher
5yrs ago
from American College of Greece in Los Angeles, CA, USA
from American College of Greece in Los Angeles, CA, USA
I've don't it twice with very distressed companies. I liked the idea of taking over the challenge, stress test my skills, and gain more experience.
Since then, I have had two separate cases where PE approached me to take over two distressed companies. Both had a long history of decreased revenues, failed attempts to market reposition, and some litigations. Ok, been there, done that, I considered the idea...BUT... unlike in the past, these companies were utterly talent drained at that point. That was a deal-breaker from my side, which was also my advice to the investors to step back. Eventually, one of them was bought in a bankruptcy auction by a notorious M&A group. The other one was purchased by a high-net-worth individual who just liked the idea at the moment of owning the IP. I can't imagine the shape of both entities at this point...but I bet I can get them out of their hands for nearly nothing. The point is, when a horse is dead, you should treat it as dead.
Since then, I have had two separate cases where PE approached me to take over two distressed companies. Both had a long history of decreased revenues, failed attempts to market reposition, and some litigations. Ok, been there, done that, I considered the idea...BUT... unlike in the past, these companies were utterly talent drained at that point. That was a deal-breaker from my side, which was also my advice to the investors to step back. Eventually, one of them was bought in a bankruptcy auction by a notorious M&A group. The other one was purchased by a high-net-worth individual who just liked the idea at the moment of owning the IP. I can't imagine the shape of both entities at this point...but I bet I can get them out of their hands for nearly nothing. The point is, when a horse is dead, you should treat it as dead.
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by an investor
1yr ago
from Thunderbird School of Global Management in Goodyear, AZ, USA
from Thunderbird School of Global Management in Goodyear, AZ, USA
I agree wholeheartedly with both Theo and Brian: Distressed is relative and while you can earn good money selling the parts of a dead horse, it’s not for people wanting to build a business.
That said, I like the ‚good bones‘ way of thinking:
- The company has a good business model but it’s poorly run.
- The owner has hit a plateau caused by his or her own limitations
- It can still pay its bills, but a downturn could put it over the edge.
- It has a core of good people that could carry a large part of the load moving forward, assuming they get the right coaching/leadership
If most of those things fit, it’s worth looking at, otherwise there are plenty of other opportunities that have a much higher return on the effort you need to put into getting it back on track.
That said, I like the ‚good bones‘ way of thinking:
- The company has a good business model but it’s poorly run.
- The owner has hit a plateau caused by his or her own limitations
- It can still pay its bills, but a downturn could put it over the edge.
- It has a core of good people that could carry a large part of the load moving forward, assuming they get the right coaching/leadership
If most of those things fit, it’s worth looking at, otherwise there are plenty of other opportunities that have a much higher return on the effort you need to put into getting it back on track.
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