{"id":1422,"date":"2012-10-10T13:23:26","date_gmt":"2012-10-10T12:23:26","guid":{"rendered":"https:\/\/www.gettogrowth.co.uk\/?p=1422"},"modified":"2012-10-10T13:23:26","modified_gmt":"2012-10-10T12:23:26","slug":"turnaround-the-wrong-pond-to-fish-in","status":"publish","type":"post","link":"https:\/\/winningthinking.co.uk\/?p=1422","title":{"rendered":"“dont getting dragged into the turnaround pond”"},"content":{"rendered":"

 <\/p>\n

Turnaround the wrong pond to fish in<\/h2>\n

The EU has \u20ac6tr of debt of which \u20ac1.2tr is distressed. When you look at a list of what may be in the 1.2tr pot, it does not make exciting reading for a turnaround investor. You would hope that there may be some shining stars. But for example when you run a list of UK CVAs Southern Cross sits pretty at the top with the diminishing list of rather nebulous businesses that decrease in value. The sheer scale of the full list is simply staggering.<\/p>\n

This debt pot not only effects businesses in the debt, but the demand markets overall.<\/p>\n

Intellectualizing the fish pond<\/h3>\n

No wonder Hayek suggested that the market should clear them out. There is no resource pool with the scale to sort them out. On the face of it with about 1\/500 exceptions are they salvageable. What will undoubtedly happen is that these pots of debt will be traded, but the longer they are left the less value they will contain. Governments are following a selective Keynesian approach, although they conveniently forget that they money has to be paid back as Keynes suggested, to centralize control of banks etc. This is ridiculous on 2 fronts;<\/p>\n

    \n
  1. The smartest people I have met \u2013 turnaround investors are fishing in this \u201cvalue free pot\u201d\n
      \n
    1. UK VCs are largely investing in UK centric businesses, when the enduring revenue opportunities are elsewhere globally<\/li>\n<\/ol>\n<\/li>\n
    2. Banks efforts\u00a0 miss the need to fix the businesses in the 1.2tr pot \u2013 they don\u2019t see that!\n
        \n
      1. The delay in recognizing the issue is destroying the competitiveness capital intensive businesses that require investment<\/li>\n
      2. But more importantly, the productivity gap between the emerging and mature markets is widening by creating literally a \u201cfalse economy\u201d<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

        The industry goes on ranting about the fish<\/h3>\n

        The next TMA conference is still when is the \u201cTidal wave of turnaround\u201d going to arrive the fact is it won\u2019t, and what\u2019s in the pot is like a fish caught in a puddle on a hot day \u2013 it has little chance of survival. What\u2019s odd is that the best minds are there with the hundreds of turnaround practitioners hoping for some tasty scraps.<\/p>\n

        \u00a0Molton’s investment logic = focus on management stupidity<\/strong><\/p>\n

        In turnaround I have eventually bought Jon Molton\u2019s criteria for success invest in a business run by idiots, the logic being that by replacing the idiots with good management the business will succeed. The difficulty comes when you are introduced to one of these businesses by a bank; they often won\u2019t let you change management. So if the management are incapable of delivering the recovery plan even with support, if you value your reputation you may as well walk away and let Hayek or Darwin theory take its course.<\/p>\n

        How easy is the value to realize anyway?<\/h3>\n

        What\u2019s for sure is that the level of horse power to identify and see through the plan to succeed is often radical. A Spanish bank commentator caught in the storm \u201cCash and operational strengthening used to work it\u2019s not working now, the level of difficulty is 10x as foundations are not sound. Although there is a shift to simplify the process, Spanish insolvency laws have been subordinate to labour laws making outcomes unclear\u201d<\/p>\n

        Turnaround the word<\/h3>\n

        Turnaround like don’t is a double negative = meaningless. Who would admit to one or want one anyway? But if you can successfully create and implement excellent robust business models and reach a point of certainty within days – that is hugely valuable capability to leverage to a corporate scenario which is less distressed. Speed gained working in the most challenging circumstances, like the skills developed in A&E are major differentiators.<\/p>\n

        Photo: Johan Opperman\/Solent News<\/span><\/p>\n

         <\/p>\n","protected":false},"excerpt":{"rendered":"

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