White knight wanted: what to expect from restructuring consultants

Abstract

Saving a company from bankruptcy may require the help of crisis consultants who have experience stabilizing organizations. Companies have a better chance of survival if they seek outside guidance at the first sign of financial difficulty. While a cash flow crisis may be the most obvious sign of trouble, it is usually not the cause but the effect of earlier difficulties such as pricing issues, lack of market penetration or lack of direction from management. Based on a case study of MicroNet, a high‐technology company, this article shows how turnaround experts can save a company that is on the brink of bankruptcy by applying creativity and problem‐solving skills. In the case of MicroNet, the crisis consultants’ actions included: stabilizing cash flow; reestablishing credibility with the lender; stabilizing product sales; refocusing on product development to affect the immediate operating horizon; organizing unsecured creditors; creating trust between vendors and MicroNet; and locating a strategic buyer. Turnaround requires immediate, aggressive and often painful actions in three areas: turnaround business, value creation and merchant banking. The principles outlined apply to companies of any size and in any industry.

Citation

Conklin, B.C. and Michelin, A.M. (2004), "White knight wanted: what to expect from restructuring consultants", Journal of Business Strategy, Vol. 25 No. 4, pp. 31-34. https://doi.org/10.1108/02756660410547377