News

Every year at Endless we are approached by hundreds of candidates who are looking for roles in turnaround deals. Some we employ and some we look forward to working with. Many we forget quickly either because they aren't suitable or fail to distinguish themselves from the hundreds of other candidates. Endless is only one of the many private equity firms investing in turnarounds and with market conditions moving in the direction of increased distressed investing and refinancing now is a great time for IFT members to ensure they are the stand out candidates in the PE world.

What are you? Cash Controller, Crisis Manager or Turnaround Practitioner?
IFT members I meet relish the challenge and diversity of taking on short term projects –putting out the fires, fixing problems and then moving on to the next company in need of help. They use phrases like "I like to stamp on things with my Size 9s", "cash is king", "attack the cost base" and so on. That's fine if you are saving a company from the brink of insolvency but not necessarily the skill-set needed to set a 3 year value creation plan for a private equity investor. If you are a cash manager or a crisis manager, say so. If you are not the man for a 3 or even 5 year project say that. Investors like to know which situation management candidates are best suited to.

A great turnaround can bring fantastic rewards
2012 and beyond will see increasing opportunities for skilled turnaround managers to take on longer term executive roles in Companies funded by turnaround investors. While requiring a longer term commitment, such roles can offer potentially very attractive rewards through a market based reward package but crucially equity participation, allowing the Manager to benefit directly from the value they create in driving the turnaround.

Endless LLP has been at the forefront of investing in turnaround situations since December 2005. A natural feature of many of the turnaround cases we invest in is that they will often require (sometimes extensive!) changes to the Management team as part of addressing the reasons for previous underperformance. As a result, having a strong network of potential Management candidates who can assist in our portfolio companies – what we call our “Connections” programme - is an essential prerequisite for what we do.

We have built a pool of proven operators who have been of enormous assistance in helping drive value in our portfolio companies, and reaped substantial personal rewards in the process too – our investment portfolio has produced 20 millionaires over the last 6 years from our Management teams as well as many more who will cash out in the short term as our turned around businesses are sold.

Standing out
For those who are interested in working with funds like Endless and taking longer term roles, the immediate challenge is how to develop a relationship with potential investors and impress on them your skills and capabilities. In common with many private equity investors, Endless is approached by managers directly, recruitment firms and advisory and professional contacts all wanting to recommend great operators. While we are always keen to try and meet quality people, we cannot hope to handle that number of relationships and have to do a lot of “filtering”.

Our first port of call is to choose individuals who have worked with us before. There is no replacing that trust and relationship built up on a previously successful spell in the trenches. It will not have escaped your notice that there are a minority of IFT members who are constantly busy and in demand for that very reason. That top tier needs to be expanded as the market improves.

Beyond that our approach is to focus on trying to identify proven operators with a track record of success as CEO’s, Chairmen or Chief Restructuring Officers in the sorts of mid market businesses we invest in. Crucially, these need not always be steeped in turnaround experience and can come from more entrepreneurial backgrounds – what we look for is evidence of the candidate’s ability to truly lead change and deliver value creation. We have backed many outstanding leaders who have built strong management teams around them, and these are the sorts of individuals we look out for.
Our initial filtration process will be based on a review of a candidates resume, references and other information to identify whether there appears to be good fit with our investment criteria. Where we think a meeting will be productive for us and the candidate, we will arrange to meet them to understand more about their background, key skillsets and aspirations for future roles.

Tips for Top Turnaround Operators
Sometimes we meet fantastic, attention grabbing individuals who we know are worth developing a relationship with. Sometimes we meet people and quickly realise we need to get out of the room! You never get a second chance to make a first impression, so we would like to share a few ideas on how to stand out from the crowd:

• When you meet a private equity firm, keep you summary of your previous career short, punchy and to the point. It is not an interview and there are no prizes for walking through your entire resume in painstaking detail! Focus on career experiences where you have clearly delivered value creation for financial stakeholders (and yourself!), and explain specifically what your role was. Previous successes should speak largely for themselves.
• Have some strong references in your back pocket. Banks and restructuring advisers are important and respected introducers of deals to turnaround funds. Positive feedback from these sources will help bolster your credentials.
• One of the critical attributes Endless looks for in its portfolio company executives is a strong sense of “ownership” and an entrepreneurial mindset. While some people can have excellent backgrounds in large corporate environments, we want to see evidence of a mentality that appreciates that every pound of cost saved or profit earned is value created for shareholders. Big company mentality tends not to sit well in turnarounds where cash is constrained.
• Being an all round generalist in terms of sector experience and skillsets is all well and good, but bear in mind you are more likely to register in the mind of an investor if they can associate you with specific sector expertise or functional skillsets such as M&A activity, change programme management, or working capital optimisation. If you can convey these skills simply and directly, the investor is more likely to think of you when a suitable deal opportunity requiring them comes up.
• Think about whether you are prepared and able to co-invest risk money alongside an equity investor in a turnaround deal. Demonstrating that you are willing to bear meaningful financial risk for the right opportunity will help assure an investor that you will truly align your incentives and risk profile with theirs. In a turnaround situation, investors want to know you have some “skin in the game” if the going gets tough – which it probably will! Also don't expect a day rate for a long term project. Value of the equity has to be your big reward.
• Take the time to understand the investment model of the funds you speak to. Private equity funds vary widely in terms of their investment strategy, deal criteria, funding capacity and sector focus. Working out which funds are likely to have the strongest deal flow in the types of deals or businesses you would like to get involved with, will make sure you are not wasting your time networking in the wrong places.
• Stay in touch. It is all too easy to fade from memory after initial contact is made with a private equity fund, and turnaround managers should not assume they are bound to get a call quickly – the right opportunity could take months or even years to come along. Simple catch up calls or brief emails keeping your PE contacts updated on your recent projects and experience are a great way to stay front of mind. Even better, generating deal opportunities or helping to identify potential acquisition targets for an investor will really mark you out as someone worth knowing.
• Put a photo on your CV. It helps us remember who you are amongst the hundreds of candidates

The opportunities and challenge of being involved in turnaround investment are not for the faint hearted, but can be very rewarding for those with the appetite to get involved!