Turnaround

An effort or strategy to restore a troubled business through operational, strategic or financial changes. In an investment context, returns may depend on achieving that recovery; a turnaround need not involve an acquisition.

Turnaround in practice

Hypothetical: a business with falling revenue and delivery problems changes its product focus, operating processes and financing arrangements. An investor considering the business tests the cost, timing and feasibility of recovery. A low entry price is not assured, and execution risk remains even when the plan does not require every initiative to succeed.

Shayne Fitz-Coy’s definition of Turnaround

Marry somebody you do not have to fix. The same principle applies to a business.

A turnaround needs a hundred separate things to go right. Look for the company that already has pricing power, recurring revenue, real contracts and a strong leadership team.

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