Restructuring Tips from Winter Harbor
We hear from Stuart Noyes, Founder and Managing Partner of Winter Harbor – a Boston-based firm which provides restructuring and turnaround expertise to middle-market companies facing operational and financial decline in an effort to improve their operational performance, liquidity, and capital structure, and efficiently implement change. Since its founding in 2012, Winter Harbor has worked on nearly 250 cases, successfully stabilising distressed and underperforming companies.
How does Winter Harbor approach the restructuring process? What are the key processes that you go through?
Our main objective when restructuring an underperforming business is to deliver the best outcome to both the company and its constituents – lenders, equity holders, customers, vendors, employees, etc. We do this by making fundamental changes in the strategic direction of the company and by addressing a series of matters such as the company’s organisational structure, financial systems, operational processes, marketing activities, quality control systems, distribution channels, etc. The first step is to understand the liquidity position of the business.
We have to quickly gain control of the company’s cash flow and decrease the outflow of capital. Once we have stabilised any cash flow problems, we can then address the operational and organisational concerns of the business. By focusing on these key business matters, we target our efforts on improving the financial position of the company and enhancing operational efficiency.
What are the challenges you face when restructuring a company?
Companies engage Winter Harbor to assist them with improving their financial position, often after defaulting on a loan from their creditor. Our initial challenge is negotiating with the creditor to allow the company time to select and effectuate the best course of action for its business and its stakeholders. We use this time to review several strategic alternatives with the company, such as refinancing its debt, restructuring the organisation, or conducting a sale. We are then tasked with securing capital to carry out the selected action, either from the company’s current creditor or from an alternative financing source.
What are the most common difficulties that your clients approach you with?
Clients approach Winter Harbor when they are faced with operational or liquidity challenges. A common reason a company experiences business decline is contributed to external factors such as a change in economic or industry conditions combined with the company’s delayed adaptation to the new market conditions. Internal factors include poor operational disciplines, inadequate diversification of resources, or mismanagement of capital (spending too much on inventory, unnecessary overhead,etc.) However, the restructuring process can also be viewed as a company’s expansionary plan such as a merger and acquisition.
What would be your piece of advice to companies undergoing a major restructuring?
Companies should act with a sense of urgency at the first signs of operational or financial trouble. By continuing to operate in their present condition, companies are complicating their business concerns, making their situation more challenging to resolve. By engaging a restructuring firm when difficulties first occur, the company will have more strategic options to choose from as it undergoes a restructuring.
From your experience, is it difficult for company directors to acknowledge that they need help?
Generally, companies are in favour of working with a restructuring firm because their directors have found themselves in an unstable business situation. In some instances, however, there is apprehension on the value we can provide. Yet, directors soon realise that our goal is to achieve a successful outcome for the company, and we are committed to having them involved in the turnaround process. By this, we build valuable relationships with our clients, and oftentimes clients reengage Winter Harbor when they need assistance with a new business concern or project.
How have you managed growth at Winter Harbor?
Over the years, Winter Harbor has grown at a modest rate because we are selective about the professionals we bring on board. Our primary concern is the quality of work we deliver to our clients. We ensure at least one managing partner is actively involved with each client engagement. We carefully staff every engagement with restructuring professionals whose experience and backgrounds best match the client’s situation and industry.
What have been some of the main challenges you’ve faced in the past 8 years?
Since we are unable to predict when a client will begin to experience issues, it can cause an unexpected demand for restructuring services. However, we’ve done a good job of managing this challenge by offering companies exploratory and comprehensive business assessments, allowing the company to determine if it is in need of a reorganisation before they engage a full-time restructuring firm.
What’s your overall vision for the company and do you have any specific plans for the future?
Our goal is to expand our team at a sustainable pace for us. We hope to have a team of 55 employees over the next 2-3 years. The restructuring and turnaround industry is likely to grow, and we’re concentrating on maintaining a dynamic team of professionals who are prepared to work with clients on a wide range of business issues and goals.