How to Restructure and Turnaround a Company

Turnaround to Success

The Road Ahead- Strategy – Plan for Value Creation

1. Introduction

At first, the work of the INVESTMENT ISLAMIC is to begin building the fund’s portfolio consistent with its investment objectives. While investing evaluation criteria will be as below.

Quality of management

Capacity to take on debt
Revenue prospects

Quality of historical earnings

Competitive advantage and disadvantage / Critical Success factors, Key Performance Indicators

Hidden liabilities

During the portfolio building phase, strategic goals are set for each company at the time of the investment.

Phase 2 implementation begins as soon as practicable. As companies are added to a portfolio, changes begin — in top management, in strategic direction, in product focus and in other areas critical to a successful turnaround. New managers will be brought on board with very modest salaries but with powerful incentives in the form of stock options that may increase dramatically in value as the turnaround begins.

The time horizon of up to 10 years allows for periodic evaluation of strategy and implementation. Mid-course corrections may be put in place, or a decision to either sell or issue an IPO for the company may occur.

2. How to do it- the plan

Strategy for Value Creation

Performance is the key factor. How we are going to perform at ISLAMIC Investment. What is our strategy and how we plan to deliver the best results. This thing can be summarized in the following five points. These are the points at the heart of our value creation and making the things happen as it should be.

Our Team at the heart of our business

First and foremost is our team. We have one of the best team from industry and consulting background with lot of proprietary knowledge of the industry. Everyone of the team has long working experience in the industry in this sector with long list of success stories. This knowledge and expertise of our people is at heart of the success. This expertise is utilized to develop deep understanding of the opportunity and future growth prospects. Based on these inputs and further study a long term growth strategy will be created.

Performance indicator- Benchmarking with the best performance indicator

Second is defining the performance indicator

What are the indicators which explain the best working of the company? What is world benchmark’s for these indicators. Detailed analysis of where do company stands. What is the key ingredient’s to improve these indicators and how this can be made possible. Definitely performance comes at the cost. Performance based incentives to those who are responsible for out-performance. Performance based incentives will be the second of our core strategies. This requires a detailed plan of Restructuring, Re-engineering and Turnaround.

Developing a value creation plan pre and post closing

This is third thing and that is planning for Restructuring, Re-engineering and Turnaround. What are the bottlenecks’s for the performance. How they can be removed and value is created. This includes detailed strategy and planning for the company.

Overhauling the management plan

Our team will invest significant time upfront in developing new plans. We will leverage independent experts. We will completely overhauled management’s strategic plan, we will invest two third of our time in developing the plan and addressed deviations about half the time.

Adjusting the plan in the first 100 days

We will do adjustments in the first 100 days based on a close tracking of basic financial metrics. We will ensure continuous interaction between the deal team and the management teams. Define new performance indicators directly linked to the value creation plan, and ensured the organization will be change ready. We will refine our strategic plans and performance indicators within the first 100 days after closing.

Reacting immediately to plan deviations

We will find deviations to plans through monthly reports and will make adjustments immediately when deviations were serious. We will call the board quickly or work directly with management. Deviations will be spotted through weekly tracking and will be corrected immediately.

Significantly involving senior deal partners in the first 100 days after closing

This is our fourth point of action. This will make the real difference, where we will plan the future.

Instead of signaling the start of a well-deserved holiday for the deal team members (after weeks of sleepless nights devoted to understanding the company, valuing it, and negotiating terms), the transaction’s closing signaled the start of a 100 -day sprint for deal team partners. We will spend more than 50 percent of our time focusing on the company, meeting almost daily with the executives. The deal team members created or refined the strategic plans, challenged management’s assumptions to ensure successful implementation, and evaluated overall management capabilities.

Proactively strengthening management teams

This is last point of our strategy but not the least. Right man at right time at the right place makes the difference. We will make sure this to happen by bringing the right man in. We will strengthen the management teams before closing and to identify additional replacements within the first 100 days post closing.

3. The Evaluation of Investment

Doing the best deal - how to win

Three issues are essential to success; industry insight, a clear view on value early in the process and speed of response which can be achieved through tight process management and anticipation of the relevant issue by taking a multi-disciplinary approach which combines Corporate Finance, Transaction Services and Tax specialists, we can respond to these challenges, “ Be first, close quickly”. The crucial issue in every transaction is, of course, price and its underlying drivers. In this context, the assumed exit value is fundamental to assessing attractiveness of an opportunity and clears understanding of the valuation dynamics, can be paramount in defining the entire auction strategy. Competitive tensions introduced by auctions mean the focus is increasingly on operational value generation to justify prices paid. The importance of industry insight and relationships are self-explanatory.

Cost effective due diligence

Our approach to due diligence is central on in-depth business understanding combining with financial and technical due diligence with review of commercial issues. This means we are quickly able to identify those items that influence value. By focusing on maintainable earnings and with deep financial analysis we are able to assess the reported track record. We understand the needs both equity and debt providers and work quickly in the pre-exclusivity stage to maximize the utility of all data sources, be it only a data room and financial due diligence with a review of commercial reporting that allows for informed decisions about value and debt-carrying capacity.

Capturing value post deal

Working capital management - often a critical issue for a new investment

Management of working capital is the key in these early days to ensure the results investors and banks are looking for in order to de-leverage and deliver returns. Management need the processes, disciplines and tools to help them manage, report and monitor. Our experienced team of cash management specialists can equip management with these methodologies in-cash generation. New methodologies and technologies can help to bring cash culture quickly and avoid the unexpected funding call.

Business restructuring - can be often be the symptom of a wider or margins initially attributed to external pricing pressures might actually be What is clearly required in dealing with turnaround situations is a multi-disciplinary approach. Early action is essential to secure maximum potential benefit.

4. Identification of Key performance Indicator (KPI) –

Without analysis of Key Performance indicator we may not be able to performance. Defining KPI is the start of process and then detailed strategy will be drawn to improve these KPI’s. Not only the KPI but also the growth potential and how to achieve these target are prime important. Accountability of the performance will also be defined.

Key Performance Indicator

Operational Performance Indicators

Asset Performance

Financial Performance

5. Restructuring and Re-engineering

Equip with detailed drawn plan and defined performance indicator is phase where execution will start. Getting the capital at right time at good conditions is important. ISLAMIC investment with capital and relation with financial world is in a strong position to fulfill the long term financial requirement for the port. With money at hand and clear development plan execution will start. Cost benefit ratio and analysis of each and every activity will be carried out at the same time SWOT will also be carried out. To deliver maximum result TQM (Total Quality Management) will be implemented. Phase three is basically Restructuring and Re-engineering.

5.1. Financial Restructuring

Financial difficulty can creep up on a company, only to be noticed when it's almost too late. While running the day-to-day affairs, it's easy to become busy to the point of overlooking small issues. Over time, these issues can add up and grow, until the company is facing a crisis they never saw coming.

5.2. Mapping the Journey: Mandate for Change

While you can't plan totally all the changes associated with re-engineering, experience has taught that there are a number of prerequisites and recurring themes that are associated with organizations that have re-engineered successfully:

· Vision and guiding principles

· Leadership

· Case for Action

· Buy-In and Commitment from Employees

· Emphasis on Communication and Culture

· Quick Hits

· Information Technology

· Governance Structure

5.3. Information Technology

In general, technology should be viewed as an enabler in re-engineering projects rather than the key driver of change. Technology must be viewed as a means of improving clients' dealings with the public service and a vehicle for improving the work and work-environment of those who deliver the service. There must be clear line management ownership with access to the best possible advice and counsel of specialists. It is the line manager who must face the employees and deal with the people issues associated with technology.

5.4. Governance Structure

Innovative business processes rarely occur if their planning, design and testing are totally managed within the existing organizational structure. To succeed, a separate governance structure outside the organization's existing processes and management hierarchy is recommended.

There are a number of critical roles that must be addressed to carry-out a re-engineering program successfully. Selection of the right people to perform the respective roles in the governance structure is critical to a successful project.

5.5. From Vision to Reality - The People Side

What we are doing is 5% technology and 95% change in culture

The vision of client-centered service that puts people - clients, stakeholders and employees -at the centre must be paramount. "Where you are now" must also be quite clear. The vision must be supported by people principles that guide the human resource aspects of the re-engineering activities.

Employees, their involvement, development and commitment, will be critical to successful business renewal.

5.6. Profiling the Future (Re-Engineered) Organization

A similar exercise is required to identify the shape and characteristics of the emerging organization and workforce. This is a more difficult exercise and will have to be based on the vision of the new organization in terms of its shape, size and skills requirements, and the re-engineered processes. Refinements will have to be made as the project progresses.

Questions to be addressed include:

· What will the new organization look like in terms of people and how they will work together?

· How do we want to manage our staff?

· What infrastructure and support is required to move the business forward?

5.7. Analyzing the Gap

Gap analysis highlights the HR issues and challenges that require management strategies to implement the business solution. By mapping the data from the current workforce and organizational profiles against the future state, analysis will identify the "gaps" between existing employee skills, knowledge and competencies, and the new organizational requirements. It will also allow managers to perform impact analyses to ascertain the organizational and HR implications including costing of various future states scenarios.

5.8. Managing the Transition

Transition is a time of "passage", when people are apt to carry around some of the baggage of their past, as well as feel the first stirrings of their future. It is also a time when employees have to face a number of challenges as old processes and ways of doing business make way for the new.

6. The valuable exit

Exit the final phase of our strategy

1. IPO

2. Trade Sale

3. Sale to other funds.

4. Financial Sale

 

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