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This presentation explain turnaround management professor harrigan, columbia business school january 2014.
...
JUNIORPROFESSUR
INTERNATIONALES TECHNOLOGIEMANAGEMENT,
INSBESONDERE INDUSTRIELLE
DIENSTLEISTUNGEN
Prof. Dr. Tim Kessler
Guest Lecture on Turnaround Management
Professor Harrigan, Columbia Business School
January 2014
Following Professor Kessler’s invitation, Professor Kathryn R. Harrigan from Columbia Business
School in New York City will come to Bayreuth to teach the course Turnaround Management from
J anuary 13, 2014 to J anuary 17, 2014.
Turnaround Management is about restructuring distressed companies and integrates the
functional disciplines of business. The course examines turnaround business situations, i.e.,
established firms experiencing operational, financial and managerial difficulties. It emphasizes the
operating manager’s perspective and considers strategy issues as well as financial ones.
Turnaround Management addresses all aspects of managing a corporation in trouble (and with
some luck, in the turnaround process). Enrollees will learn to distinguish between “troubled” firms
(that can be repaired) and “crisis” companies that are unlikely to survive. The course looks at
restructuring operations, assets and liabilities, capital structures, organizational issues and
strategy.
Professor Harrigan is the Henry R. Kravis Professor of Business Leadership at Columbia
Business School in New York City. She teaches courses in strategic management and
international business strategy and is a specialist in corporate strategy, industry and competitor
analysis, diversification strategy, joint ventures, mergers and acquisitions, turnarounds, industry
restructurings and competitive problems of mature- and declining-demand businesses. She
serves on the boards of three publicly traded firms and is the author of several prize-winning
books on strategy.
All master students are welcome to join the course. However, attendance is limited. Successful
participants will obtain 6 ECTS credits. Credit can be transferred to the following courses:
? V 1-6: Ausgewählte Kapitel in Finanzen und Banken, Prof. Dr. Schäfer
? B 1-6: Betriebswirtschaftliches Forschungsprojekt, Prof. Dr. Schäfer
? V 8-4: Ausgewählte Fragen zum Dienstleistungsmanagement, Prof. Dr. Woratschek
? V 10-2: Ausgewählte Spezialfragen in der Internationalen Rechnungslegung, Prof. Dr. Fülbier
? V 11-1, V 11-2 & V 11-3: Prof. Dr. Seifert
? V 12-3: Fallstudien zum Controlling, Prof. Dr. Knauer
? J P ITM 1 & 2: Prof. Dr. Kessler
? Ergänzungsmodul
To apply for participation, please send an email specifying your major degree, semester, and
areas of specialization to [email protected].
A short introduction to the course will be given on December 12, 2013, noon, room S 42.
Should you have any further questions please contact me via email [email protected] or
call 0921-55-2819.
Prof. Dr. Tim Kessler
...
2
Turnaround Management (January 2014)
PROFESSOR KATHRYN R. HARRIGAN
TEXT: J ohn O. Whitney (1998) Taking Charge: Management Guide to Troubled
Companies and Turnarounds
CASES: Cases are “problem sets”. Solutions will be discussed in class sessions.
PRIMARY OBJ ECTIVES OF THE COURSE
? To help enrollees recognize symptoms (and early warning signals) associated with
distressed divisions, subsidiaries, or diversified companies (or those on the way to
trouble).
? To help enrollees diagnose the root causes of business trouble
? To help them prescribe effective corrective action appropriate to the resources available,
in light of competitive intensity, general economic conditions, and other exogenous
opportunities and constraints, e.g., technological, regulatory, social, demographic,
political, et cetera.
COURSE OUTLINE AND MATERIALS LIST FOR TURNAROUND MANAGEMENT
Session 1: Distressed Companies – Cash Flow Is King!
Cases Due:
“ Nadir Publishing” – Bring your written solution to class (Solo)
“ Bonne Chance (A) and (B)” – Start working on your solution, bring questions
Reading Assignments Due:
“Chapter 1: Style and Substance” and “Chapter 2: Marketing in the Turnaround’s
Early Stages,” in J . Whitney (1987), Taking Charge: A Management Guide to
Troubled Companies and Turnarounds, Dow J ones Irwin, pp. 3-34.
Harrigan, K.R. (2011) “A Turnaround Strategy Framework,” Caseworks #110407
Topics from Other Courses: Change management; product line selection; releasing cash
from assets; ratio analysis; pro forma analyses
Comments concerning the write-up of Nadir Publishing due in Session 1:
Make recommendations for Nadir Publishing that will make it more solvent (and keep it away
from insolvency or bankruptcy). Suggest ways of improving cash flow. Make a
recommendation about the opportunity to distribute the new line of titles (include your
persuasive evidence). Recommend how to handle future relationships with creditors. You
could provide annotated ratio analysis (if it provides insights), a calculation of Nadir’s “burn
rate,” an estimate of break-even levels of activity, some comparison with industry norms,
projections of cash flows (at least one week hence), pro forma financial statements and
analyses, and a candid assessment of Nadir’s liquidation value (if it were not a going
concern).
______________________________________________________________________
...
3
Session 2: Managing the Turnaround Process
Cases Due:
“ Lyric Dinner Theater” [9-386-056] – Discussed in class only
“ Bonne Chance (A) and (B)” – First trial solution, follow instructions regarding
constraints. (Group or solo)
Topics from Other Courses: Forecasting weekly cash flows from operations; timing of
payables; profitability of product lines; situation assessment; strategy implementation
Comments concerning the solution of Bonne Chance (A) and (B) due in Session 2:
According to the Bonne Chance (B) case, you should prepare (and clearly label) (a) the 4
th
Quarter Bonne Chance Base Case Cash Projection (NO Swatch, NO Rolex trade-in sales
promotions, NO Rolex inventory balancing, NO other merchandise off-price sale, and NO
expense reductions); (b) all three of the Financial Statements of the firm -- the Bonne
Chance P&L, Balance Sheet, and a Summary Sources and Uses Statement for the period
October 1 through December 31, 2005; and (c) Impact of Swatch on Bonne Chance -- the
Cash Projections and P&L with Swatch included (plus the other assumptions delineated in
the (B) case).
______________________________________________________________________
Session 3: Restructuring Distressed Companies
Required Cases due:
“ Bonne Chance (A) and (B)” – Final solution is due, follow instructions regarding
constraints. (Group or solo)
“ Foamex International Inc. Operating Performance Case Study”
“ Foamex International Inc. Capital Structure Case Study”
Discussed in class during Session 3. Bring your questions. Submit for session 4.
Reading Assignments Due:
H. Miller, M. J acob, A. Bauer & G. J ohnson (1999), “Insolvency: A Legal Guide,”
International Financial Law Review, London, J anuary, pp. 25-31
Topics from Other Courses: Corporate governance, divestiture, financial restructuring;
debt-for-debt swaps, debt-for-equity swaps; shareholder dilution; price-cost squeezes; role of
investment bankers in turnarounds and restructurings; valuing an ongoing firm
Comment concerning Bonne Chance assignment:
Build on your analysis of Bonne Chance (A) and (B) as you use any combination of the
restricted solutions e.g., (a) Inventory Balancing, (b) Rolex Trade-in Sales, (c) 40%-Off-Price
Sale of Other Merchandise, (d) Factoring, or (e) any other solution you devise needed to
meet 2005 End of Year goals. Comment on the financial impact of these “extraordinary
fixes” and of adding Swatch (or not) to product line. Assume that factoring is at 20% of face
value of “good” receivables.
______________________________________________________________________
...
4
Session 4: Repercussions of Restructuring
Required Case Materials:
“ Foamex International Inc. Operating Performance Case Study”
“ Foamex International Inc. Capital Structure Case Study”
Submit your recommendations (Group or solo)
“ Solo Cup in 2007” [KEL505]
Discussed in class only.
Reading Assignments Due:
Holt (2007), “International Bankruptcy and the Spirit of Comity: New U.S. Law
Encourages Cooperation among Nations,” Business Horizons, vol. 50, pp.
105-112.
Topics from Other Courses: Integrating acquisitions; rationalizing product lines; role
of consulting firms in turnarounds; restructuring
Comment concerning Foamex International exchange offer assignment: There are rival
factions that want Foamex to be restructured in a way that favors their situation. You must
make a recommendation among rival reorganization plans and exchange offers with
supporting analysis and a memo detailing your conclusions concerning how Foamex should
emerge from restructuring.
...
5
NADIR PUBLISHING
At 9:00 AM, you are appointed President of Nadir Publishing. Seven days from now you must present a plan of
action that will convince your bank to extend the $4 million note that was due today.
For your information, Nadir has 3,000,000 shares authorized and 1,000,000 shares issued and
outstanding. Current market price is 2–2.20. The stock is widely held. Trading volume is small and
sporadic. Half the sales for the year just ended are from book titles it publishes. The other half is from book titles
distributed for an overseas “packager.”
Bookstores as well as their on line competitors – together they comprise more than 80% of Nadir’s business –
normally pay within 45 days of invoice. Invoices are usually sent within 15 days of shipment, and therefore,
average A/R DSO is 60 days. Both brick and mortar bookstores as well as online companies that maintain
inventories have the right to return unsold books for credit. Book sales vary widely from month to month, but for
purposes of this analysis, assume that sales are evenly spread through the year.
At 4:00 pm, your marketing director came in with a proposed solution to last year’s revenue and income
declines. He has found a packager with an exciting new line of book titles that should add $5 million to annual
sales. With a 50% gross margin, the contribution of $2.5 million, less commissions of $500 thousands, will bring
Nadir back to break even. Furthermore, he has negotiated favorable terms: 1/3 in each of 30, 60, and 90 days
after date of delivery.
Some industry norms are:
· 3 – 5 times inventory turns
· 30 – 40 % COGS for published book titles
· 50 – 60 % COGS for distributed book titles
· 20% SG&A expense/sales
· 8% sales representatives’ commissions
6
NADIR PUBLISHING
CONDENSED INCOME STATEMENT
FOR 12 MONTH PERIOD ENDING TODAY ($000)
Gross sales $54,000
Less returns and allowances 4,000
Net Sales 50,000
Less cost of goods sold 27,500
Gross profit 22,500
Operating Expenses
Commissions 5,000
SG&A 14,500
R&D 3,000
Sub total 22,500
Operating Profit 0
Interest 2,000
Income (Loss) before taxes (2,000)
NADIR PUBLISHING
BALANCE SHEET – TODAY ($000)
Current Assets
Cash $250
Accounts Receivable, net of reserves 14,000
Inventories, net of reserves 20,000
Subtotal current assets 34,250
Plant, property & equipment 4,000
Total Assets 38,250
Liabilities and Shareholders’ Equity
Current*
Notes payable $4,000
Current maturities of long term debt 1,000
Accounts payable 15,000
Other current 2,000
Subtotal current liabilities 22,000
Long term debt 10,000
Shareholders’ equity 6,250
Total Liabilities and Shareholders’ Equity 38,250
*Outstanding $3,000 Letter of Credit not shown on balance sheet
doc_696964249.pdf
This presentation explain turnaround management professor harrigan, columbia business school january 2014.
...
JUNIORPROFESSUR
INTERNATIONALES TECHNOLOGIEMANAGEMENT,
INSBESONDERE INDUSTRIELLE
DIENSTLEISTUNGEN
Prof. Dr. Tim Kessler
Guest Lecture on Turnaround Management
Professor Harrigan, Columbia Business School
January 2014
Following Professor Kessler’s invitation, Professor Kathryn R. Harrigan from Columbia Business
School in New York City will come to Bayreuth to teach the course Turnaround Management from
J anuary 13, 2014 to J anuary 17, 2014.
Turnaround Management is about restructuring distressed companies and integrates the
functional disciplines of business. The course examines turnaround business situations, i.e.,
established firms experiencing operational, financial and managerial difficulties. It emphasizes the
operating manager’s perspective and considers strategy issues as well as financial ones.
Turnaround Management addresses all aspects of managing a corporation in trouble (and with
some luck, in the turnaround process). Enrollees will learn to distinguish between “troubled” firms
(that can be repaired) and “crisis” companies that are unlikely to survive. The course looks at
restructuring operations, assets and liabilities, capital structures, organizational issues and
strategy.
Professor Harrigan is the Henry R. Kravis Professor of Business Leadership at Columbia
Business School in New York City. She teaches courses in strategic management and
international business strategy and is a specialist in corporate strategy, industry and competitor
analysis, diversification strategy, joint ventures, mergers and acquisitions, turnarounds, industry
restructurings and competitive problems of mature- and declining-demand businesses. She
serves on the boards of three publicly traded firms and is the author of several prize-winning
books on strategy.
All master students are welcome to join the course. However, attendance is limited. Successful
participants will obtain 6 ECTS credits. Credit can be transferred to the following courses:
? V 1-6: Ausgewählte Kapitel in Finanzen und Banken, Prof. Dr. Schäfer
? B 1-6: Betriebswirtschaftliches Forschungsprojekt, Prof. Dr. Schäfer
? V 8-4: Ausgewählte Fragen zum Dienstleistungsmanagement, Prof. Dr. Woratschek
? V 10-2: Ausgewählte Spezialfragen in der Internationalen Rechnungslegung, Prof. Dr. Fülbier
? V 11-1, V 11-2 & V 11-3: Prof. Dr. Seifert
? V 12-3: Fallstudien zum Controlling, Prof. Dr. Knauer
? J P ITM 1 & 2: Prof. Dr. Kessler
? Ergänzungsmodul
To apply for participation, please send an email specifying your major degree, semester, and
areas of specialization to [email protected].
A short introduction to the course will be given on December 12, 2013, noon, room S 42.
Should you have any further questions please contact me via email [email protected] or
call 0921-55-2819.
Prof. Dr. Tim Kessler
...
2
Turnaround Management (January 2014)
PROFESSOR KATHRYN R. HARRIGAN
TEXT: J ohn O. Whitney (1998) Taking Charge: Management Guide to Troubled
Companies and Turnarounds
CASES: Cases are “problem sets”. Solutions will be discussed in class sessions.
PRIMARY OBJ ECTIVES OF THE COURSE
? To help enrollees recognize symptoms (and early warning signals) associated with
distressed divisions, subsidiaries, or diversified companies (or those on the way to
trouble).
? To help enrollees diagnose the root causes of business trouble
? To help them prescribe effective corrective action appropriate to the resources available,
in light of competitive intensity, general economic conditions, and other exogenous
opportunities and constraints, e.g., technological, regulatory, social, demographic,
political, et cetera.
COURSE OUTLINE AND MATERIALS LIST FOR TURNAROUND MANAGEMENT
Session 1: Distressed Companies – Cash Flow Is King!
Cases Due:
“ Nadir Publishing” – Bring your written solution to class (Solo)
“ Bonne Chance (A) and (B)” – Start working on your solution, bring questions
Reading Assignments Due:
“Chapter 1: Style and Substance” and “Chapter 2: Marketing in the Turnaround’s
Early Stages,” in J . Whitney (1987), Taking Charge: A Management Guide to
Troubled Companies and Turnarounds, Dow J ones Irwin, pp. 3-34.
Harrigan, K.R. (2011) “A Turnaround Strategy Framework,” Caseworks #110407
Topics from Other Courses: Change management; product line selection; releasing cash
from assets; ratio analysis; pro forma analyses
Comments concerning the write-up of Nadir Publishing due in Session 1:
Make recommendations for Nadir Publishing that will make it more solvent (and keep it away
from insolvency or bankruptcy). Suggest ways of improving cash flow. Make a
recommendation about the opportunity to distribute the new line of titles (include your
persuasive evidence). Recommend how to handle future relationships with creditors. You
could provide annotated ratio analysis (if it provides insights), a calculation of Nadir’s “burn
rate,” an estimate of break-even levels of activity, some comparison with industry norms,
projections of cash flows (at least one week hence), pro forma financial statements and
analyses, and a candid assessment of Nadir’s liquidation value (if it were not a going
concern).
______________________________________________________________________
...
3
Session 2: Managing the Turnaround Process
Cases Due:
“ Lyric Dinner Theater” [9-386-056] – Discussed in class only
“ Bonne Chance (A) and (B)” – First trial solution, follow instructions regarding
constraints. (Group or solo)
Topics from Other Courses: Forecasting weekly cash flows from operations; timing of
payables; profitability of product lines; situation assessment; strategy implementation
Comments concerning the solution of Bonne Chance (A) and (B) due in Session 2:
According to the Bonne Chance (B) case, you should prepare (and clearly label) (a) the 4
th
Quarter Bonne Chance Base Case Cash Projection (NO Swatch, NO Rolex trade-in sales
promotions, NO Rolex inventory balancing, NO other merchandise off-price sale, and NO
expense reductions); (b) all three of the Financial Statements of the firm -- the Bonne
Chance P&L, Balance Sheet, and a Summary Sources and Uses Statement for the period
October 1 through December 31, 2005; and (c) Impact of Swatch on Bonne Chance -- the
Cash Projections and P&L with Swatch included (plus the other assumptions delineated in
the (B) case).
______________________________________________________________________
Session 3: Restructuring Distressed Companies
Required Cases due:
“ Bonne Chance (A) and (B)” – Final solution is due, follow instructions regarding
constraints. (Group or solo)
“ Foamex International Inc. Operating Performance Case Study”
“ Foamex International Inc. Capital Structure Case Study”
Discussed in class during Session 3. Bring your questions. Submit for session 4.
Reading Assignments Due:
H. Miller, M. J acob, A. Bauer & G. J ohnson (1999), “Insolvency: A Legal Guide,”
International Financial Law Review, London, J anuary, pp. 25-31
Topics from Other Courses: Corporate governance, divestiture, financial restructuring;
debt-for-debt swaps, debt-for-equity swaps; shareholder dilution; price-cost squeezes; role of
investment bankers in turnarounds and restructurings; valuing an ongoing firm
Comment concerning Bonne Chance assignment:
Build on your analysis of Bonne Chance (A) and (B) as you use any combination of the
restricted solutions e.g., (a) Inventory Balancing, (b) Rolex Trade-in Sales, (c) 40%-Off-Price
Sale of Other Merchandise, (d) Factoring, or (e) any other solution you devise needed to
meet 2005 End of Year goals. Comment on the financial impact of these “extraordinary
fixes” and of adding Swatch (or not) to product line. Assume that factoring is at 20% of face
value of “good” receivables.
______________________________________________________________________
...
4
Session 4: Repercussions of Restructuring
Required Case Materials:
“ Foamex International Inc. Operating Performance Case Study”
“ Foamex International Inc. Capital Structure Case Study”
Submit your recommendations (Group or solo)
“ Solo Cup in 2007” [KEL505]
Discussed in class only.
Reading Assignments Due:
Holt (2007), “International Bankruptcy and the Spirit of Comity: New U.S. Law
Encourages Cooperation among Nations,” Business Horizons, vol. 50, pp.
105-112.
Topics from Other Courses: Integrating acquisitions; rationalizing product lines; role
of consulting firms in turnarounds; restructuring
Comment concerning Foamex International exchange offer assignment: There are rival
factions that want Foamex to be restructured in a way that favors their situation. You must
make a recommendation among rival reorganization plans and exchange offers with
supporting analysis and a memo detailing your conclusions concerning how Foamex should
emerge from restructuring.
...
5
NADIR PUBLISHING
At 9:00 AM, you are appointed President of Nadir Publishing. Seven days from now you must present a plan of
action that will convince your bank to extend the $4 million note that was due today.
For your information, Nadir has 3,000,000 shares authorized and 1,000,000 shares issued and
outstanding. Current market price is 2–2.20. The stock is widely held. Trading volume is small and
sporadic. Half the sales for the year just ended are from book titles it publishes. The other half is from book titles
distributed for an overseas “packager.”
Bookstores as well as their on line competitors – together they comprise more than 80% of Nadir’s business –
normally pay within 45 days of invoice. Invoices are usually sent within 15 days of shipment, and therefore,
average A/R DSO is 60 days. Both brick and mortar bookstores as well as online companies that maintain
inventories have the right to return unsold books for credit. Book sales vary widely from month to month, but for
purposes of this analysis, assume that sales are evenly spread through the year.
At 4:00 pm, your marketing director came in with a proposed solution to last year’s revenue and income
declines. He has found a packager with an exciting new line of book titles that should add $5 million to annual
sales. With a 50% gross margin, the contribution of $2.5 million, less commissions of $500 thousands, will bring
Nadir back to break even. Furthermore, he has negotiated favorable terms: 1/3 in each of 30, 60, and 90 days
after date of delivery.
Some industry norms are:
· 3 – 5 times inventory turns
· 30 – 40 % COGS for published book titles
· 50 – 60 % COGS for distributed book titles
· 20% SG&A expense/sales
· 8% sales representatives’ commissions
6
NADIR PUBLISHING
CONDENSED INCOME STATEMENT
FOR 12 MONTH PERIOD ENDING TODAY ($000)
Gross sales $54,000
Less returns and allowances 4,000
Net Sales 50,000
Less cost of goods sold 27,500
Gross profit 22,500
Operating Expenses
Commissions 5,000
SG&A 14,500
R&D 3,000
Sub total 22,500
Operating Profit 0
Interest 2,000
Income (Loss) before taxes (2,000)
NADIR PUBLISHING
BALANCE SHEET – TODAY ($000)
Current Assets
Cash $250
Accounts Receivable, net of reserves 14,000
Inventories, net of reserves 20,000
Subtotal current assets 34,250
Plant, property & equipment 4,000
Total Assets 38,250
Liabilities and Shareholders’ Equity
Current*
Notes payable $4,000
Current maturities of long term debt 1,000
Accounts payable 15,000
Other current 2,000
Subtotal current liabilities 22,000
Long term debt 10,000
Shareholders’ equity 6,250
Total Liabilities and Shareholders’ Equity 38,250
*Outstanding $3,000 Letter of Credit not shown on balance sheet
doc_696964249.pdf