Turnaround

Companies may need a turnaround after years of losses, falling sales, too much debt, poor management, failed strategies or changes in their markets. Turnarounds are often led by new management or specialist turnaround executives.

A typical turnaround involves several stages: stabilising cash flow to ensure survival, assessing the business to identify what can be saved, restructuring operations by cutting costs, selling or closing unprofitable units and improving efficiency, restructuring debts if needed, and then rebuilding growth with a refocused strategy.

For example, a struggling retailer might close loss-making stores, renegotiate leases, reduce stock, sell a non-core division, agree new terms with lenders and invest in its online business, returning to profit within a few years.

Turnarounds are difficult and many fail. Success depends on acting quickly, strong leadership, the support of lenders, employees and suppliers, and having a viable core business. Some investors, called turnaround or distressed investors, specialize in buying troubled companies and leading their recovery.