In the Bleak Mid-Winter……..
Dear All
You’ll mostly be cheered to know that it is bleak mid-winter in the private equity world.
Portfolio companies are struggling with weak markets and, in a lot of cases, a lot of debt and ratty bankers. Losses in the big buy-outs of 2005-7 now look likely to be enormous.
Investors are giving private equity less cash to play with and debt to finance deals is very difficult to extract. Woe is us.
But there is opportunity for the bolder souls – a weak competitor is a great opportunity, acquisitions will look amazingly cheap in a few years and the good managers will do relatively much better in these times.
Cash will be central and its control imperative. A strong finance function will never be more critical – now is the time to listen to finance and for finance to make its voice heard. Conservative, accurate and rapid reporting and forecasting will never be more important – if you haven’t got these attributes you probably have little remaining opportunity to get them.
The economy has not bottomed – we all still need to plan for worse.
Keep conserving the cash, cutting the costs and generally surviving. Spring will follow – only the year is uncertain.”
Regards
Jon
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Tags: Events, Jon Moulton
February 24th, 2009 at 4:57 pm
Hi
As an ex COA Solutions employee and having worked in a Finance Role before your post reminded me of when my first company a pharmaceutical company in the early 1980’s decided on a number of measures to preserve cash. We kicked off an audit of hardware to access depreciation and my job involved sticking black labels with codes on to everything I could find. I found several rented printers that were costing several hundred pounds each year but were no longer being used. We cancelled the contracts and no one complained. We then did analysis on the general ledger line by line to save 10% of spend. Its amazing what you find when you are looking - at the time I was locked in a room with my MD having a very fun week producing reports. We found the company had paid for mothers days gifts and appeared to have a very healthy investment in the local gentleman’s club. All these expenses were frozen and stopped. The entire exercise was run by Finance and the management team - no one was allowed to be excluded. We found by doing this no jobs were lost and the company survived that down turn. Action of course was the key and a healthy process focussed on Costs. Our spring did follow and the company was sold off in the end and eaten by pharmaceutical giants.
NB - The local club never recovered from its lack of investment I am told !