Sink or swim. That’s what happened to a 36-year-old Kevin Dowd when he was dispatched to Brazil by Citicorp to work as a CEO for a holding company with five business units. His mission: to learn about debt instruments – in Portuguese.
This was no easy assignment. He had to leave his family, which included four kids, travel to an unfamiliar land with its own culture and learn a foreign language, while overseeing five business units.
He didn’t sink, and that success has served him well in his future endeavors. A few examples stand out:
Situation: Globelle, a distributor of computer industry products with sales of $800 million, was unable to properly integrate two acquisitions, resulting in significant operating losses. Secured creditors, as a precondition to continued loan advances, demanded a major infusion of additional capital by the international parent company.
A review of management’s turnaround plans and related earnings and cash flow projections disclosed major flaws in financial assumptions and a high probability that the plans could not be successfully implemented. Due to ongoing negative cash flow, a Big Five accounting firm that said it could deliver between 7 and 10 cents back to creditors, before fees, recommended an immediate liquidation.
Dowd conducted his own liquidation analysis. The end result, after sales of assets, out of court settlements and liquidation of receivables and inventory was delivering 67 cents back to creditors, after fees. Although the parent company was forced to take large write-offs, it remained a viable entity without the overleverage and debt service obligations that would have been required to make investments requested.
Situation: During a period of severe financial difficulties and operational disruptions, the long time CEO of a high visibility, over-leveraged, family owned business named Soft Sheen resigned. Another family member, who lacked the general management background/financial expertise to handle the many operational and financial restructuring issues, replaced him.
With Nightingale in control, cash flow measurement and control systems were installed; production scheduling was brought under control; investment in receivables and inventory was reduced; daily meetings with the new CEO were held to provide guidance in resolving problems; and the operations of subsidiaries in Brazil and Jamaica were restructured.
The result: a major turnaround in profitability. A new second level management was recruited and Nightingale exited the situation after 15 months. Shortly thereafter, the company was sold at an attractive price to The L’Oreal Group, the world leader in cosmetics and hair care.