Howard Brownstein, it is safe to say, is a true expert in providing turnaround management and advisory services to companies, as well as their stakeholders. Brownstein serves as an independent corporate board member for both publicly held as well as privately-owned companies and nonprofits and is considered to be one of the world’s top experts in distressed businesses. He believes it is essential to remember that not all distressed businesses are, in fact, the same. There is simply no way to know how bad things are for a given distressed business until one begins to “look under the hood,” and get a full view of what problems may lurk underneath.
Brownstein firmly believes that distressed businesses can represent a real and often overlooked opportunity for buyers. Sadly, the recent economic downturn brought about by COVID-19 means that there will likely be a great deal more distressed businesses on the market in the coming months or even in the next couple of years.
Why is a Given Business Distressed?
Before you consider purchasing a distressed business, you must absolutely understand the core reasons for the distress. Without a proper and detailed understanding of why the business entered a state of distress in the first place, it is impossible to clearly articulate why the business will potentially be valuable in the future. It is essential to know what went wrong and how the problems can be fixed. While there are many reasons for a business to enter distress, two symptoms top the list. The first is cash flow issues and the second issue relates to management. Often it turns out that the management was simply not rigorous enough. Brownstein notes also that companies will tend to blame external issues for their failures.
Of course, no two distressed businesses fail from 100% identical causes. Brownstein suggests these questions to ask when you begin exploring a distressed business.
- What is the business’ potential value?
- Is there something of value under the problems?
- Under better or different circumstances, can the business be viable?
These are all questions that your business broker or M&A advisor can assist with. It’s important to gain a clear understanding of the business’ past, present and future.
Copyright: Business Brokerage Press, Inc.
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