Create Your Fortunes in the World Recession

Almost every country around the world has been paid deep a concern in current world crisis.There are two questions on all our lips. “How am I to avoid falling victim to the economic plaque?” and “How do I make money, profit and improve my position for the future in the current distress?”

We have arrived at the generational time when man can attempt, if he so desires, to control the economic powers around him and dare to guide the “invisible hand” of wealth creation.




Opportunities abound but it is the smart investor who will succeed. It is more likely that investor- led acquisitions to build turnover will be the remedy of this plaque.

Businesses and assets are already available at a fraction of their value compared with only three months ago. More opportunities will emerge throughout this is year and without being the voice of doom well into 2010.

Private equity investment firms are not infallible and, like many commercial businesses, will have erred in buoyant times in their decisions to invest. There is no reward for failure, and private equity firms are accountable to other, much the same as many of us. They will need to deal with their rotten eggs and make better investments for the future. However, not all investments go as planned with sky rocketing returns. Cash is in demand and, with bargains to be had, private equity investment in the form of turnaround finance stand in the best shoes to back growth. It already is, and will be, very important in the forthcoming years.

The starting point to surviving the recession is ensuring that your own ship is in order. Taking on water in stormy seas is a disaster waiting to happen. Now is the time to check for leaks, remove unwanted weight taken on in fair weather and to tighten the sheets. This is a time for the captains of industry to make a cold reflection on what will make your business sink or cut gracefully through the troubled waters. The inability to take and implement aggressive decisions in respect of operating costs, staff, marketing and other sector issues will determine how much extra baggage and the number of leaks your ship carries forward into the storm. The lighter, streamlined ship is often the stronger in this race.

With the sails trimmed you need to keep a vigilant watch. Corrective action to a rogue wave will prevent untimely and unwanted course deviation. You want your ship to be streamlined, clean-sailing and reactive to correction, particularly in the present climate. This strategy will give any business the best chance of a strong financial base. Of course, all this must happen with the assumption that things will get worse with lower turnover as the storm strengthens.

With your own business on sound footing, it is only then possible to look outward for the opportunities to be had.

There is lots of competition out there. Lots of businesses, investors and others are financially willing and able to take advantage of deals. As the business values erode, the opportunities increase (as does investor interest); but not without risk. Any distressed investment requires focus, toughness, industry knowledge, experience and consensus. If you don’t have these, aligning yourself with those who do could mean the difference between a successful investment or otherwise.

A bridging statement is fundamental to this process and helps to visualise (and bring to life by implementation) the impact of cost cutting, operational changes and lower turnover. It is the sextant of the canny investor or turnaround practitioner and helps guide them through the darkened seas.

If, for example, you operate or have an existing investment in one sector, there may be other business in the same sector you would like to own. Last year, any valuation to those businesses would have been too high. Now, however, it is likely that the valuation is reduced, the market is affecting that business and they may not have taken any corrective action to streamline their business. They may be distressed, in which case it is an ideal arena for building your own turnover by acquisition. This can be cost effective and, done well, can reap the full benefits of economies of scale. In time, these consolidated investments would lead to strong investor returns.

Structuring deals, aside from the value brought by bridging statements, is important. There is little value to be had from treating the symptoms of the plague rather than finding a remedy to removing the course. Such remedies could include renegotiating the bank’s position. For example, a percentage compromise on loan to value (a deal better than the bank appointing a LPA Receiver). Compromising unsecured creditors are prime considerations. This could be done with debt for equity swaps, informal workouts or insolvency processes in such a way as to not damage the business. Creditors would rather have a compromised return that no return at all. After all, the plaque affects us all.

Turnaround finance, either your own or outside investment, is also critical. The deal structure is only one part of a three-legged stool. Management (plan), Restructuring (deal) and Turnaround Finance (cash) are the legs. If any of those legs are missing, the stool will fall. There is a core group of experienced and storm weather turnaround investors who not only have the cash behind them to invest directly or alongside other owners, but which have also weathered previous storms and bring the scars, knowhow and technique to the table. Sail with the experienced sailors to avoid being caught by the storm and dashed against the rocks on a plagues-infested land.