Contact: John Hartgen
703-894-5935
ABI JOURNAL ARTICLE EXPLORES WHETHER
THE DISTRESSED INDUSTRY IS SHRINKING—OR SHIFTING
July 28, 2011, Alexandria, Va. — An article in
the July/August edition of the ABI Journal finds that the
turnaround industry is changing more in focus rather than size. In
“Is the Distressed Industry Distressed,” author
Kenneth R. Yager II of MorrisAnderson (Chicago) writes
that despite rumors that the distressed industry is shrinking,
“the overall distressed industry is still growing, albeit heavily
fueled by international growth.”
The biggest change that Yager identifies since the Bankruptcy Code was
implemented in 1978 has been the change in focus from plans of
reorganization (POR) to the new era of transactions. “While for
decades hardly anyone was interested in buying a broken company, today
competitive § 363 sales are common, as are debt sales or trades and
asset sales,” according to Yager. Rather than trying to fix
companies so that they can be sold, Yager pointed out that turnaround
professionals are increasingly facilitating or managing a distressed
company through a sale or liquidation transaction or alternatively to
maximize value on behalf of a new owner. “This shift is pushing
crisis managers to become much more like performance improvement
consultants,” Yager wrote.
With less of a focus in bankruptcy on PORs, Yager said that the
turnaround industry is evolving to become more open to other skill sets.
“Turnaround firms have two main options in positioning themselves
within the changing field: seek to become larger, or adapt to a
particular niche,” Yager wrote. While larger firms continue to
grow internationally and focus on large company work, Yager said that
smaller firms “need to compete instead on expertise by developing
a narrower focus, building a reputation for specific types of services
in a small number of key industries.”
The shift in focus from PORs to transactions will have a permanent
impact on the turnaround industry, according to Yager, by calling for a
new level of specialization. “The jack of all trades [bankruptcy
practitioner] is becoming a low card in the industry’s
deck.”
To obtain a copy of “Is the Distressed Industry Distressed,”
published in the July/August edition of the ABI Journal, please
contact John Hartgen at 703-894-5935 or via email at
href='mailto:jhartgen@abiworld.org'>jhartgen@abiworld.org.
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