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B8511-001–TurnaroundManagement(Spring2019)

(Please note this Syllabus, and the sequencing of materials described and assigned herein, is subject to change during the course; however, the general structure and content will remain the same.)

Always consult CANVAS for the most current and up to date sequence of due dates.

ADJUNCTPROFESSORDOUGLASW.SQUASONI,E-mail:dws18@columbia.eduOfficeHours:(Byappointmentonly)

COURSESHORTDESCRIPTION

Welcometothenexusofbusiness:TurnaroundManagement!Companies,orsubsidiarieswithinotherwisehealthycompanies,oftenareinneedofacorporateturnaroundorrestructuringduetooperational,financial,ormanagerialproblemsthatariseasthecompany’sbusinessenvironmentchangesovertime.

Whatiscoveredinthiscourse?

Thiscoursewillintegratethefunctionaldisciplinesofthecorecurriculum,buildinguponyourbasicunderstandingofaccounting,corporatefinance,productmarketing,organizationalleadershipdevelopment,andstrategyformulation.Althoughthiscourseisdrivenbyafocusonthestrategic,operational,andhumanresourceconsiderationsregardinghowageneralmanagerhandlesadistressedbusinesssituation,therestillisasignificantamountofrequiredworkinthefinancialandaccountingsubjectareas.

WhatwillIlearninthiscourse?

Thiscoursewillprovideyouwithanunderstanding,paradigm,andmodelstructureforidentifying,remedying,andresolvingtroubledanddistressedbusinesssituations.Youwilllearnfromthestandpointofageneraloperatingmanagerhowtodistinguishbetweencompaniesthatcanberepaired(givenexistingresourceconstraints)andthosesituationswheresaleorliquidationofthecompanyactuallyisthebestalternativetopursue.

ShouldItakethiscourse?

Althoughtheprimaryfocusofthiscourseistroubledcompaniesandtroubleddivisionswithinotherwisehealthycompanies,theperspectivesandanalyticalframeworkforidentifyingproblems,assessingalternatives,andmakingdecisionsthatimpactthefuturesurvivalofabusinessareskillsthatalsoareapplicableinastart-upenvironment,wherescarceresourcesandtimeconstraintscreateasimilarneedforevaluatingincompleteandinaccuratedata,inordertomaketime-sensitivedecisionsthatdirectlyimpactthefutureviabilityofthebusiness.

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Youshouldtakethiscourseifyouareinterestedinpursuingacareerin(a)restructuringadvisory,turnaroundmanagement,oractivist/distressedinvesting;(b)privateequityandwanttolearnhowtoassessandaddressproblemsarisinginyourportfoliocompanies;or(c)generalmanagementorentrepreneurshipandwanttohaveafoundationalunderstandingofhowtohandleacrisissituationwhenitarisesinyourcompany.

COURSELEARNINGOBJECTIVES

Aftercompletionofthiscourse,youshouldbeableto:

(1) Understandwhyitistypicalforabusinesstodeteriorateinperformanceovertimeandidentifyareasofabusinesswherefuturepotentialproblemscurrentlymayexist;

(2) Explainthestepsinvolvedinacorporaterestructuringprocess,frominitialanalysisofthesituationthroughevaluationofpossiblealternativeplans,includingoutrightsaleorliquidationofthebusiness,withorwithoutusingaformalbankruptcyprocessaspartofthestrategy;

(3) Recognizesymptomsandearlywarningsignalsassociatedwithasubsidiary,division,orcompanythatisonthepathtotrouble;

(4) Diagnosetherootcausesofthetroubleandbeabletoidentifythestepsrequiredintheoverallprocessforcorrectingperformance;

(5) Constructappropriateplansforcorrectiveaction,aswellasevaluateplansproposedbyothers,givenbothinternalandexternalresourceconstraintsandtimechallenges,whichalsotakeintoconsiderationthemultipleconstituentsinterestedinthefutureofthebusiness(e.g.,employees,customers,suppliers,shareholders,lenders,competitors,governments);and

(6) Envisionthemanagementmethods,policies,andpracticesthat,ifimplemented,shouldkeepacompanyoutofcrisissituations.

ASSIGNMENTS

StudyGroup/FinalProjectGroup

Youwillbeaskedtoformgroupsofnolessthanthree(3)andnotmorethanfive(5)students,eachpreferablyfromavarietyofworkexperiencesandbackgrounds,andsubmityourproposedteamcompositiontomebytheendofSession2.Inthecontextofhandlingtroubledcompanysituations,itisextremelyrare,otherthansometimesasaLiquidatingTrusteeattheendofabankruptcyprocess,thatyouwillbecompletelyaloneandindividuallyresponsibleforallofthework.Therefore,inanefforttoreplicatethecollaborativeenvironmentinwhichyouwillengageduringyourbusinesscareer,ifthereareanyindividualswhoarenotingroupsbytheendofSession2,Iwillassistintheteamassemblyprocesstothebestofmyabilities.

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InterimWrittenAssignments

Therewillbeatotaloffour(4)writtenassignments,notincludingtheFinalProject.ThefirstassignmentwillbedueatthebeginningofSession3.ThisfirstassignmentwillbeTypeB(i.e.,youcandiscussandworkontheassignmenttogether,buteveryindividualmustsubmittheirownworkproduct(nosharingofanyportionofthesubmission)).(SeeofficialColumbiaBusinessSchoolchartofassignmenttypesbelow.)

Thenextthree(3)writtenassignmentswilleachbeofTypeA,andarerequiredtobehandedinatthebeginningofeachrelevantsessionasdeliverablesforSessions5,7,and9(or11),respectively.Withrespecttothefourth(4th)writtenassignment,groupswillhaveachoicebetweensubmittingawrittenanalysisofeithertheAlleghenycasedueSession9orthetwo(2)combinedFoamexcasesdueSession11.YouarenotrequiredtosubmitbothAlleghenyandFoamex,however,youmustsubmitwhicheveroneyouchooseonthedayitisdue.

Industriousgroups(orindividuals)arewelcometosubmitadditionalcasewrite-ups,forwhichtheymayreceiveextracreditattheprofessor’ssolediscretion.(Pleaserefertothesectionbelowentitled,“METHODOFEVALUATION”foradditionalinformationregardinggradingmethodology.)

FinalProject

Thefinalgroupprojectwillbeawrittenanalysiswithrecommendationsfora“turnaround”ofapublicly-tradedcompany.StudentswillbeexpectedtoselectacompanyandsubmitaproposaltomebytheendofSession8.Thefinalprojectisnot“justareport.”Totheextentpossible,thegroupwillbeexpectedtorecommendandsupportaturnaroundstrategyforthesubjectcompany.Ifthegroup’sconclusionisthatthecompanyshouldmerge,beacquired,orfileforChapter11,theimplicationsofthisactionformanagers,employees,shareholders,lenders,creditors,customers,etc.,mustbeconsideredanddiscussed,andthiscourseofactionshouldbecarefullysupportedthroughgoodanalysis.Ontheotherhand,recommendationsforrecoveryalsowillneedsolidsupport.

ReportFormats

Allwrittensubmissionsmustbepreparedusing12-pointCalibrifontforallalphaandnumericcharacters.Coversheets,TablesofContents,andExecutiveSummariesarenotcountedinanyspecifiedpagelimit.Students/groupsalsoshouldsubmittheirMSExcelfiles(incaseclarificationisneeded),however,thesubmittedwrittenassignmentsshouldbeself-sufficient.IfyousubmityourMSExcelfiles,whichisrecommended(inordertoclearlysupportyourwork),youmustincludethekeyexcerptsfromsuchanalysesinyourmainwrittendocument.Iwillreadsupplementarymaterialsthatareofferedtoclarifyconfusinganalysesorrecommendations.TheFinalProjectwillhaveanall-inclusivepagelimitof30(PDFpages).Remember,oftentimes“lessismore.”Striveforconcisionandprecisioninyourwrittensubmissions.

InordertoavoidambiguitythatmayleadtounintentionalviolationsoftheHonorCode,thedescriptiontypesforassignmentshavebeenstandardized.Theyarespecifiedinthetablebelow.

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Type DesignationDiscussionofconcepts

Preparationofsubmission Grade

A group/group Permittedwithdesignatedgroup* Bythegroup

Samegradeforeachmemberof

thegroup

B group/individual Permitted

Individually

(Nosharingofanyportionofthesubmission)

Individual

C individual/individual Noneofanykind Individually Individual

D

(Anoptionalcategorytobedefinedindetailbytheindividualfacultymember)

*Thedesignatedgroupcanbeeitheranassignedstudygrouporaself-selectedone.

REQUIREDCOURSEMATERIALS

Acustomizedsetofcasesandotherassignedand/oroptionalreadingswillbemadeavailableonCANVASorvialinksasmayberequiredduetocopyrightrestrictions,whereapplicable.Coursematerialalsowillincludethefollowingtextbook:TakingCharge:ManagementGuidetoTroubledCompaniesandTurnaroundsbyJohnO.Whitney(BeardBooks(January19,1998)ISBN-13:978-1893122031).

CLASSROOMNORMSANDEXPECTATIONS

ClassAttendanceandStructureofClassTime

Attendanceisnecessarytothelearningexperience,andsinceclassparticipationisonecomponentofmyevaluationofyourperformanceinthecourse–anditisimpossibletoparticipateinabsentia–yourattendanceisexpectedandunexcusedabsenceswillaffectyourcoursegradeadversely.Youareresponsibleformaterialdiscussedordistributedinyourabsence.

ExcusedabsencesarethosethatareofficiallysanctionedbyColumbiaBusinessSchool’sacademicregulations.InALLcasesofabsence(whethertheabsencequalifiesas“excused”ornot),professionalconductandcourtesydictatethatyouinformmepriortotheclasssessionyouwillmiss.Pleaserefertothesectionbelowentitled,“METHODOFEVALUATION”foradditionalinformationregardingtheimpactofattendanceonyourgrade.

Classroomtimegenerallywillbedividedamonglectures,casediscussion,andengagementwithinvitedguests,whenapplicable.Typically,newmaterialwillbeintroducedduringthefirsthalfoftheclasssession,withsummary,review,andpreludefornextclassbeingthefocusofthesecondhalf.Namecardsarerequiredforeveryclasssession.Withonlytwelve(12)classmeetings,Ineedeveryopportunitytoconnectnameswithfaces.

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ArrivalsandDeparturesDuringClass

Punctualityisatouchstonefortheintegrityofanindividual.Iwillholdmyselftothesamehighstandard,asIbelievethatbeingearlyactuallyisbeing“ontime.”Havingsaidthis,however,Ialsoacknowledgethat“life”hasanastyhabitofgettinginthewayofschedules–particularlyforthoseofusinthebusinessofdealingwithdistressedcompaniesincrisissituations.

Therefore,ifyouhavetoarrivelatetoclass,pleaseenterquietlywithoutfanfareorparade,inordertoshowyourrespectforyourclassmates(andforme),andsettleintoyourseatcreatingaslittledisruptiontothosearoundyouaspossible.

Ifyouknowinadvancethatyouwillhavetoleaveforanyreasonduringaclasssession,aswithanabsence,pleaseletmeknowpriortoyourearlydeparture.Idon’tneedtoknowwhy(unlessyou’dliketoshare),onlythatyouhavetoleave.Ifyouneedtoleavesuddenlyandunexpectedlyduringclass,whetheryouwillbereturningornot,pleaseshowthesamerespecttoyourclassmatesasyoudepartthatyouwouldasifyouarrivedlate(seeabove).

ConsumablesDuringClass

Classlengthis195minutesonceaweekandwewilltakeatleastone,butnomorethantwo,10to15-minutebreakafterapproximately55minutes,wheneverpossible.WhileIamokaywithbeverages,aslongasyoudon’tspillthemonyourneighbor(ortheirpapers),Imustprohibiteatingmealsorlargesnacksduringclass.Therearetworeasonsforthis.First,crinkly-soundsaredistractingtoyourclassmates(andtome).Second,inthe“real”world,evenwhendealingwithacrisissituation,nosingleindividualeatstheirmealorsnackduringameeting;althoughthereare“workingmeals”duringwhicheveryoneeats,ourclasssessionswillnotbestructuredas“breakfast,lunch,ordinnertheater.”

UseofTechnologyDuringClass

Youmayuselaptopsorotherdevices(e.g.,tablets)totakenotesduringtheclasssession.Ipersonallyprefertotakenotesbytyping,ratherthanwriting,however,itisnotarequirementandyoustillcanuseanoldfashionedpenandpaperandwillnotbejudged(atleastnotbyme).

Thispermission,however,comeswithafewrestrictions.Thesoundmustbeonmute(ifyoudon’tknowhowtoturnthesoundoff,askafriend).DonotwatchYouTubeorsurftheInternetduringclass–notbecauseIcarethatyoudon’twanttopayattention,butbecauseyourlaughterorexcitementwillbedisruptiveanddisrespectfultothosearoundyouwhoaretryingtolearn.

Asforcellphonesorotherhand-helddevices(yes,IknowthereareatleasttwoBlackberryusersoutthere),IwillconductclasslikeIconductmymeetingswithmyprofessionalcolleagues–ifyouarecalleduponandyouarenotpayingattentionbecauseyouaretryingtokeepyourstreakaliveinSnapchat,thiswillhaveanegativeimpactonmyevaluationofyourclassparticipation.Aswithlaptops,thesoundmustbeonmute,however,ifyouhaveitsettovibrate,pleasedon’tleaveitonyourdesk,asthis,too,willbedisruptiveanddisrespectfultothosearoundyou.YouarealladultsandIwillrelyuponyourcommonsense.

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AddressingtheProfessor

Since“GreatandPowerfulOz”alreadyistaken,“Professor”(withorwithout“Squasoni”afterward)willbefine.

TeachingPhilosophyandAccountability

Thisisanapplied,case-basedcoursewithaccompanyingreadingstohelpstructureyourthinking.Discussionquestionsforthecase(ifavailable)usuallywillbegivenpriortoeachsession,tohelpfocusyourattention.Studentsshouldbepreparedtodiscussallcases,whetherornotasubmittedwrite-upisrequired.Additionalreadings(ifany)areintendedtoprovideastartingpointforanalyzingthecase,butextensionoftheideasisencouraged,astheywillbeappliedinanintegrativefashionduringourdiscussions.Giventhenatureofthecourse,wealsowillapplythelessonsfromthecasestounderstandthechallengesandimplicationsofrelevantrecentandon-goingdistressedandcrisisbusinesssituations.

Inthiscourse,asinlife,thebenefityoureceivewillbedirectlycorrelatedwiththeamountofeffortyouputintopreparation.Mypersonalmanagerialphilosophyisto“praiseinpublicandadmonishinprivate,”however,theclassroomsettingdoesnotalwayspermitsuchflexibility,particularlywhenIcallonsomeoneandtheironlyresponseisthattheyareunprepared.Yourobligationinthiscourseistoprepareforclassdiscussionbythoroughlyreadingandanalyzingeachoftheassignedmaterialsbeforeeachclass.Thisisanessentialpartofthecourse.Studentsareresponsibleforbeingpreparedtodiscussanswerstoallstudyquestions(ifany)beforecomingtoclass.Studentsmaybeaskedtopresenttheassignedmaterialsasabasisfordiscussion.Absentwillingvolunteers,pleaseknowthatIwillbecoldcallingduringeachsession,inordertoensureactiveengagementandsharingofideas.

INCLUSION,ACCOMMODATIONS,ANDSUPPORTFORSTUDENTS

AtColumbiaBusinessSchool,webelievethatdiversitystrengthensanycommunityorbusinessmodelandbringsitgreatersuccess.ColumbiaBusinessSchooliscommittedtoprovidingallstudentswiththeequalopportunitytothriveintheclassroombyprovidingalearning,living,andworkingenvironmentfreefromdiscrimination,harassment,andbiasonthebasisofgender,sexualorientation,race,ethnicity,socioeconomicstatus,orability.

StudentsseekingaccommodationintheclassroommayobtaininformationontheservicesofferedbyColumbiaUniversity’sOfficeofDisabilityServicesonlineatwww.health.columbia.edu/docs/services/ods/index.htmlorbycontacting(212)854-2388.

METHODOFEVALUATION

JohnO.Whitneywasthefoundingfatherofthiscourse,originallycalledthe“ManagementofTurnarounds,”hereatColumbiaBusinessSchool.Beforedetailingspecificallocationsandpercentagesofgradeweightingsforthiscourse,Ifirstwouldliketosharesomeofhisviewsongradesandgrading,whichareexcerptedhereinfromtheFall1994SyllabusforthiscoursewhenIwasoneofhisstudents,andwithwhichIheartilyagree(evenmoresonowasaninstructor).

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“Theinstructorbelievesthatgradesarepoorpredictorsoffutureperformance,thatelementsoflotteryexistinallgradingprocesses,andthatstrivingforgradesgetsinthewayoflearning.Buttheinstructorisawarethatheisamemberofalargercommunityinwhichgradesareimportant,andheisalsoawarethathisrefusaltoassigngradeswouldhavebroaderimplicationsthanareassociatedwiththisclass.Therefore,theinstructorcommitsthathewillperformthetaskofgradingcarefullyandthoughtfully.”

***

Coursegradeswillbebaseduponthefollowingpercentageallocations:

ClassParticipation 25%WrittenAssignments 35%FinalProject 40%

AdditionalInformationonClassParticipation

Inthiscourse,classparticipationwillmeanboththecontributionsmadeinthescheduledclassperiods,aswellasincontributionsmadebythestudentswhen(andif)theymeetasgroupswithme.Evaluationsofclassparticipationwillbebasednotonlyonmyviewofyourmasteryoftheconcepts,butalsoonyourabilitytobringnewandcreativeinsightsthatwillraiseourclassdiscussionstoahigherlevel.Itobviouslygoeswithoutsaying(butI’llsayithereanyway)thatattendanceismandatoryinordertoreceivecreditforclassparticipation.

I’mcompelledtoparaphraseJohnO.Whitneyregardinggradingclassparticipation.Irealizethatthereareinherentinequitiesingradingclassparticipation,particularlyinlargeclassthatonlymeetstwelve(12)times.Ifyoubelievethatyouhavenothadtheopportunities,eitherduringclassorinagroupmeetingwithme,todemonstrateyourmasteryofthesubjectmatter,thenyoushouldscheduleanappointmentwithmeforanindividualconsultation.Justsoyouknow,tothebestofmyknowledge,Ipersonallydon’tknowthatanyoneevertookhimuponthisoffer–butheextendedittomyclassbackin1994,andsoIextenditnowtoyou.

COURSEROADMAP/SCHEDULE

Classesare195minutesinlength(inclusiveofourmid-sessionbreaks),andusuallywillbedividedbetweenbrieflectureoverviewandclasscaseanalysisanddiscussion.Guestspeakerswillbeannouncedatleastone(1)weekinadvanceoftheirappearance.Noguaranteeswillbemaderegardinganyparticularguestspeaker,however,becauseofthenatureofdealingwithtroubledcompanies,itisdifficulttoperfectlyplanone’scalendar,evenafterconfirmingthedaybefore.

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Session Date Pre-ClassReadings[R]–Required(O)-Optional

Deliverables[R]–Required(O)-Optional

1 Feb1(Fri.)

TurnaroundManagementEveryDay[R]TakingCharge,Ch.1[R]TakingCharge,Ch.6[R]ATurnaroundStrategyFramework[R]LearningSuccessfromDistress[R]StrategicDecline[R]

None

2 Feb4(Mon.)

CASE:LyricDinnerTheater[R]NoteonFinancialAnalysis[R]NoteonFinancialForecasting[R]WeeklyCash-FlowAnalysis:WhyIsn'tIta"BestPractice"?[R]LeadershipandthePsychologyofTurnarounds[R]

None

3 Feb11(Mon.)

CASE:NadirPublishing[R]CashProjection:ThePastisNotPrologue[R]TakingCharge,Ch.3[R]TakingCharge,Ch.4[R]SuccessfulRestructuringRequiresaHardLookatLegacyCosts[R]

NadirPublishing[R]

4 Feb18(Mon.)

NoteonImplementingStrategy[R]TakingCharge,Ch.5[R]InvestinginDistressedCompanies[R]SecondLienFinancing[R]LenderAcceptanceFuelsExplosioninSecond-LienMarket[R]Debtor-in-PossessionFinancing[R]BankruptcyPractice:SecondLiensandBankruptcy{Part1}[R]{Part2}(O)

None

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Session Date Pre-ClassReadings[R]–Required(O)-Optional

Deliverables[R]–Required(O)-Optional

5 Feb25(Mon.)

CASE:BonneChance(2015)[R]CASE:Master’sNovelty[R]FeedtheWinners…StarvetheLosers[R]OrganizationalDeclineandInnovation[R]ManagingDecliningBusinesses[R]WhenaNewManagerTakesCharge[R]

BonneChance(2015)[R]

6 Mar4(Mon.)

GUESTLECTURERBankruptcyBasics(pp.5–42;pp.71–76)[R]AStrategicPerspectiveonBankruptcy[R]WhatHappensWhenPublicCompaniesGoBankrupt?(FromSEC.govwebsite)[R]

None

7 Mar25(Mon.)

CASE:BonneChance(2016)[R]CASE:ClevelandTwistDrill(A)&(B)[R]TakingCharge,Ch.9[R]TakingCharge,Ch.10[R]NoteRegardingPreparationofCase:AlleghenyInternational[R]PreparationoftheLiquidationAnalysis[R]

BonneChance(2016)[R]

8 Apr1(Mon.)

GUESTLECTURERCaseassignment(s)TBDbyGuest(AvailableonCANVASoneweekpriortoclasssession)TrustFactor,Ch.2[R]TrustFactor,Ch.3[R]TrustFactor,Ch.5[R]

NoneGroupProposalDueforFinalProject

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Session Date Pre-ClassReadings[R]–Required(O)-Optional

Deliverables[R]–Required(O)-Optional

9 Apr8(Mon.)

CASE:AlleghenyInternational[R]CASE:ThomasCookontheBrink[R]TakingCharge,Ch.2[R]TakingCharge,Ch.8[R]LearningtoLetGo:MakingBetterExitDecisions[R]

AlleghenyInternational[R]–STUDENTCHOICE(THISORFOAMEX)

10 Apr15(Mon.)

CASE:PRG-SchultzInternational(A)[R]CASE:SharpElectronicsin2013[R]TrustFactor,Ch.8[R]TrustFactor,Ch.9[R]AreCROsMorePowerfulThanTurnaroundConsultants?[R]PygmalioninManagement[R]

None

11 Apr22(Mon.)

CASE:FoamexInternationalInc.(Operational)[R]ANDCASE:FoamexInternationalInc.(Capital)[R]CASE:SoloCupin2007[R]TrustFactor,Ch.6[R]TrustFactor,Ch.7[R]TrustFactor,AppendixC(O)StrategiesforDecliningIndustries[R]InnovatingaTurnaroundatLEGO[R]

FoamexInternationalInc.(Operational)AND(Capital)[MUSTBEREADTOGETHER–ONESINGLEWRITE-UP][R]–STUDENTCHOICE(THISCOMBINATIONORALLEGHENY)

12 Apr29(Mon.)

CASE:GTAdvancedTechnologies[R]TakingCharge,Ch.12[R]TrustFactor,Ch.10[R]TrustFactor,Ch.11[R]StrategicSelection[R]

None