You Can’t Always Get What You Want

If there’s been a question I have been asked more than any other in the last 12 months it is, “What’s the market like?” Actually, it’s the question I have been asked the most in the last 30 years. Strangely, it is both a question that the questioner doesn’t really mean, (they actually are asking, “Have you got a role for me?”) and one I am unlikely to answer truthfully, (“Better than it was, but not as good as I would like”).

It’s not that I am generally evasive. Experience tells me that the best relationships are built on a central core of truth. However, it is very difficult to turn my anecdotal experience into macroeconomic market intelligence. Hence, I don’t try to make sweeping assessments, and I would never be dumb enough to turn my impressions of what is going on in my clients into predictions of how the UK Interim Management market will play out for the rest of 2021.
Well, you would think I wouldn’t, but since so many people have asked …

1. THE RETURN OF THE RESTRUCTURING AND TURNAROUND MARKET

First, the bad news.

There is no doubt that the combination of government support, banks and landlords acting like social enterprises and investors’ risk aversion have meant that one of the most significant drivers of senior Interim Management activity, turnaround, has been depressed for the last 18 months. Levels of activity have been lower even than in booming economies, with stakeholders unwilling to wear the ‘bad guy’ hat and hoping for a post-vaccination bounce.

Some will be rewarded, but most will not and I expect that many businesses running on the fumes of furlough and deferred rent will not survive the winter. Sadly, because the intervention will not have come early enough, I suspect insolvency rather than turnaround will be the outcome for most. Bad for those affected, and bad for Interim turnaround specialists.

Obviously the market will come back again, but not in the tidal wave people in my industry are hoping for.

Sorry.

2. PRIVATE EQUITY

Better news in PE. This is a market, perhaps more than any other, which is beloved by my profession. The process of acquisition, rationalization, growth and sale – at pace – creates opportunity for Interim Managers at every point in the cycle.

There’s no doubt that the pace which fires this market has dropped in the last year, and consequently opportunities have been harder to come by. Without new acquisitions at one end of the hopper and lucrative exits at the other, there has been a tendency to ‘love the one you’re with’ and, perhaps, hold onto underperforming assets in the hope of better news to follow. PE firms, like everyone else, have ‘bosses’ to appease and better to perform surgery on the lacklustre performers in the portfolio after a number of eye catching acquisitions and profitable exits.

As the UK economy improves there will be lots more opportunities to bury bad news, and I confidently expect that the PE led Interim Management market will come roaring back. PE firms love the ability to rapidly move the dial that top class Interim Management offers them.

They won’t have forgotten.

3. MORE THAN JUST A ‘DISTRESSED PURCHASE’

Interim Managers get used to being viewed as a distressed purchase, and perhaps even as a necessary evil. They can be at their most effective in the weeds, in distressed businesses, holding off the bank and the HMRC and making sure they can meet next month’s payroll.

It doesn’t have to be this way.

My colleagues in Valtus France typically work with large, successful businesses who view Interim Management – or Transition Management as it is known there – as a cogent alternative to ‘big consultancy’. There are signs that this trend is moving across La Manche and bigger, successful businesses are experiencing Interim Management for the first time.

In many cases these are fundamentally secure, successful enterprises who are negotiating the double whammy of COVID and Brexit. While, doubtless, with a few more issues than they had in early 2019 and perhaps a little less profitable, these are businesses looking to press home their commercial advantage over more vulnerable competitors. If your profits have gone back 10% while all your competitors are making losses, you are winning the game. Press home the advantage, use skilled short-term resource to help drive change, emerge into 2022 as the dominant market player.

4. A FOCUS ON THE TOP LINE

In the early months of COVID the Interim Market, which is always driven by the bottom line, became obsessively so. With customers, sales, revenues and profit all hard to come by, businesses focused on the only thing they could control, the cost line. What this meant in practice was that, if you were lucky enough to be pick up a mandate, it was going to be in HR (i.e. cost cutting), Finance (i.e. cost cutting) Procurement…you get the picture. Businesses were on war footing and did what they needed to do to get by.

With a better economic outlook driven by business confidence and the success of the vaccination programme, the focus has changed markedly and the balance of opportunities has changed with it. Sales transformation, customer experience, marketing and communications, are all in the ascendancy and I expect this to continue. Certainly, with successful businesses entering the Interim market place for the first time, cost obsession will transform into profit optimisation and growth.

Where this can be seen most is in the supply chain discipline, where the old guard of price obsessed professionals is giving way to those who can focus on the customers’ needs and align the businesses processes to satisfy them. Nando’s running out of chicken and McDonald’s running out of milkshake is not about a failure to hire van drivers or production line workers in a post-Brexit Britain. It’s a failure of business to focus on the customer.

Interim Managers can help business put the customer back at the heart of what they do.

5. WE ARE ALL TECHNOLOGISTS

The senior IT market was badly hit by COVID, with projects and programmes iced and budgets slashed. While there was doubtless some opportunity created by the rapid move to flexible working practices, this largely benefited more junior infrastructure staff or anyone who had heard of Zoom or Teams. Senior IT Interim Managers painted a lot of spare bedrooms.

The good news is that this market is coming back strongly, not least because the world of work has been irrevocably changed by COVID and its requirement for technology has changed with it. However, this is only likely to be a short term trend and much less significant than the big news that we now all work for technology companies.

Whereas ‘technology company’ ten years ago meant Google or Microsoft, it could now mean a pharma business, widget manufacturer or restaurant chain. Businesses for whom IT was the guys who order laptops, now not just use IT in their businesses, to facilitate their customer engagement and to deliver product. They believe IT defines them, is their future and is the largest contributor to their multiple.

In many businesses this is already the case, in some it is ambition, but for most it is window dressing. It is the statement of strategy without much reality to the delivery.

Fortunately, Interim Managers excel at delivery and I believe that the ‘technologising’ of business by IT professionals and Change/Transformation specialists will be a significant trend for the foreseeable future.

So, after many tough months in the Interim Management market, there are better times ahead. While traditional markets may not revert to pre-COVID levels anytime soon, other new markets will replace them bringing Interim Management to new customers and solving new problems.

You can’t always get what you want, but you might just find you get what you need.

Steve Rutherford
Partner, Valtus

September 2021

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To learn more about the value Interim Management can bring to your organisation, please contact Steve at steve.rutherford@valtus.uk

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