IVCA Toolkit Luncheon Showcases Optimal Reactions to Economic Downturn

IVCA Toolkit Luncheon Showcases Optimal Reactions to Economic Downturn

February 24, 2009

CHICAGO - “ A panel of experts from Alvarez & Marsal (A&M) presented their take on - œDeveloping an Action Plan to React to the Economic Downturn-  during the Feb. 11, 2009 IVCA Toolkit Series. While there are a few bright spots in these rocky times, it pays for companies to get a firm grasp on their standing as early as possible.

- œThere is a lot of negative panic in the marketplace,-  said Daniel L. Galante. Galante is the managing director of A&M's Transaction Advisory Group. Despite the gloom, Galante did note that tax breaks and clean-energy incentive credits from the American Recovery & Reinvestment Act will provide meaningful relief as we all navigate these rough waters.

Galante introduced the panel. While A&M has recently been in the press (it currently advises Lehman Brothers and Washington Mutual), he noted that the 1,400-employee firm (including 100 transaction and private equity specialists with offices in 39 cities) typically focuses on companies with revenue between $100 million and $1 billion.

Richard Jenkins, who also is a managing director in the firm's Transaction Advisory Group, pinpointed three things that separate today's sour economy with recessions of generations past: severity, tight credit markets and perspectives companies have relative to their financing options.

Cash management, Jenkins said, is the key to keeping operations flowing. He said a conservative and realistic assessment of a company's financial situation combined with meaningful integration and automation of accounting and cash management processes is essential. In terms of operational cost cutting, he said the first step is defining - œnon-critical vendors-  that can be paid later.

Companies should then eliminate the - œlow-hanging fruit-  expenses including freight, warehousing, travel and expenses on non-essential strategic initiatives. The third and most prolonged step is a comprehensive assessment of the business.

George Varughese, who is A&M's national practice leader in its Corporate Finance Department, said there are only three options a company has as it's sliding into cash and financial troubles: restructuring (the most common method today and often through the bankruptcy process), M&A and financing (which stopped working as an alternative for most entities about a year ago).

Before extreme measures are taken, A&M Transaction Advisory Group managing director Kent Willetts noted that - œoperational processes can improve liquidity- . He advised companies to optimize vendor relationships and focus on cash collection more than revenue generation.

The IVCA instituted the IVCA Toolkit Series in 2008 as a way to help members respond to the increasingly challenging and competitive industry landscape. The next association event will focus on homegrown successes in health care on April 16, 2009.