Surviving the Economic Crisis — PwC's Perspective

Strategy Talks

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Dean Mullett
Helen Mallovy Hicks

Episode 1: Surviving the Economic Crisis — PwC's Perspective

Release date: Mar. 6, 2009
Hosts: Dean Mullett and Helen Mallovy Hicks
Running time: 12:46 minutes
 

Helen Mallovy Hicks introduces the podcast series Strategy Talks, and offer real-world coping strategies for businesses in this economic downturn.

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Episode 1 transcript:

Dean: Welcome to Strategy Talks with Dean and Helen, part of the PricewaterhouseCoopers Managing in a Downturn podcast series. I'm Dean Mullett, co-head of our Restructuring and Distress Strategy Group, and a member of our Credit Crisis Task Force.

Helen: And I'm Helen Mallovy Hicks, a Partner in the Advisory Practice of PricewaterhouseCoopers in the Dispute Analysis & Valuations group.

Dean: The current state of the economy is understandably of great concern for most Canadian businesses. This series of audio podcast discussions with a variety of subject matter and industry guests are designed to help your business weather the storm by exploring some of today's hottest issues related to the economic crisis.

Helen: So welcome to PricewaterhouseCoopers first episode of Strategy Talks. In this episode of Strategy Talks, we will be speaking on surviving the economic crisis, PwC's perspective. And we will discuss some of the key areas of concern businesses have been coming to us with in these uncertain times. All evidence seems to suggest that this economic downturn is certainly not going away anytime soon, and the fact that PricewaterhouseCoopers has formed the Restructuring and Distress Strategy Group to help clients manage through these tough times speaks volumes. Dean, have you ever seen an economy like this before?

Dean: Helen, quite frankly I have not. I started my career with PwC in the early 1990s — right in the midst of the last major recession I guess before the dot-com bust — and things were tough then, real estate was tough then, and people were losing their jobs, but this time is just off the radar.

Helen: Well Dean, what is so different about this downturn, and why did PwC determine the need to form the Restructuring and Distress Strategy Group to help our clients deal with these issues?

Dean: Helen, the difference of it this time is the breadth, the depth and the speed of which things are happening. The pace of deceleration is accelerating and I think a lot of businesses are caught off guard because of this. From the perspective of us starting the Restructuring Distress Strategy Group, we deal with a lot of companies around the country, and they've been coming to us looking for help and looking for answers and how they can cope in these times. We feel that in downtimes, what the market is really looking for, what our clients are really looking for, and what our people are really looking for is leadership. And PwC, through the Restructuring and Distress Strategy Group is looking to provide that leadership on a timely and effective basis.

Helen: Dean, we're obviously seeing rapid changes in the capital markets right now, what's your perspective on these, and what are some of the key challenges for businesses that you're seeing?

Dean: The capital markets are certainly tighter than they've ever been, and a lot of that is driven by the credit markets — so go the credit markets, that's how the capital markets will go. Without adequate supply of debt, the equity markets will also be impacted. Right now, the credit markets are particularly tight, as banks around the globe are struggling with their own problems. This impacts just about every business.

Very few businesses in this world don't have some form of debt or, quite frankly, even some form of investment in banks so they have some ties to banks at some point. So a lot of the companies right now are focused on managing their liquidity. Banks are going back to their traditional banking where they're managing risks. They're deleveraging and costs are increasing. So overall, I think people are trying to find their way in the capital markets, and they don't know what the answers are, and they're looking for those answers. And quite frankly, I think anyone who tells you they know all of the answers today, really doesn't know the answer at all.

Helen: Let's talk about what companies are coming to us for these days, and why is it important to take a multi-disciplinary approach to dealing with the impact of the economic downturn?

Dean: The multi-disciplinary approach, Helen, is absolutely critical, because I think the volume, the breadth of the change that is happening; people are being impacted in many shapes and forms — ways you wouldn't have even imagined a few months ago. Because of this, every aspect of their organization is under strain, under pressure.

Helen: Dean, what about on the strategy side, I've heard you say that strategy is a critical part of the fix. What are we doing on the strategy side and why is that so important?

Dean: The strategy side, quite frankly, is the umbrella that all that other stuff falls within. If you don't have a defined strategy of what you're trying to do with your business, where you're trying to take it, the rest of it is just noise that goes on with no purpose, no aim, no goal at the end. Strategy is about positioning your business both for today and into the future, and then developing a plan with action steps underneath it to get there. So without that strategy, you're not going to get anywhere. You know the old saying, "if you don't have a map, you're not going to end up where you want to be." And the strategy is the map to get there.

Helen: I think that's right, and I think that we'll hear that in our other podcasts.

Dean: I guess three that I would particularly highlight are along the lines of one, with Vince De Luca — Talking to Your Banker. Understanding how you're going to manage your banker, you need to have a strategy around that, and the strategy of your business will drive the strategy for dealing with your banker. So that is an absolutely important episode that you should not miss. If you don't manage your banker well in this environment, chances are you are going to be running into some trouble with them.

I would also focus on the episode of the restructuring side with Dave Planques. Dave's a National Leader of our Corporate Advisory and Restructuring practice. And as any restructuring goes you need a plan to get to where you want to be. So you need to know where you want to be, and strategy plays a major element to that as well.

And then lastly, I would just like to profile the performance improvement, the continuous improvement episode with Calum Semple. And that's about getting a business performing at its peak. It's about getting the cost structure right. It's about intelligent cost management. So once again, you need a strategy. It's not reactive, it's proactive. All those things have a proactive element to it and to be proactive you need a strategy.

Helen: Dean, we often hear about that there are opportunities in a downturn. That it's time for companies to gain market share or to leap frog over their competitors. How viable is such a growth strategy, and what advice or opportunities do you see for our clients in this downturn?

Dean: In every situation there is a silver lining that you can find. Some people choose to put their head down and hope that time passes them by and then come out the other side of it. I think for the smart company, well capitalized, the well managed company, they can really take advantage of the environment that we're in today. One example: a lot of companies are running into financial difficulties. There are some that are not. They can take advantage of the business opportunities that their competitors once had that they can no longer satisfy. So you can grow just by the means of being there.

That's a pretty simple win in this marketplace today. I think another thing that we're seeing is the press is full of people being displaced — job cuts and things of that nature. You know what — some of those people are year ago would have been well sought after in a very tight job market. Some very qualified people that I think if you have the means to invest in good people, now is the time to upgrade some of your talent. So I think that's an opportunity as well. I think there is the opportunity to make strategic M&A. Where an asset before may not have been available, or available in a basis the value made any sense to you. Where companies now have to sell parts of their business that were once before so valued they would never have sold.

So I think there's lots of ways for people to take advantage of the current environment. I think the key overriding commonality amongst all of them, is about continuing to invest in your business. A lot of people put both eyes on the present in an environment like today, and they forget about tomorrow. I can be pretty sure to say tomorrow will come. We're not sure what that tomorrow will be, or if it will be several tomorrows that we get to a much brighter economy, it's hard to say — but this downturn will end, and I think companies that position themselves to come out of this downturn on the upswing will just rocket forward compared to companies that perhaps do not.

Helen: Dean, I know we're going to be talking to Peter Dale, who leads our Private Equity practice in a future episode of Strategy Talks. And I think Peter Dale had some thoughts on opportunities for private equity firms. Do you care to give us a sneak preview on some of those thoughts?

Dean: Yes, Peter will be in talking about Private Equity, and as you know Helen, private equity always gets lots of attention. Peter will be talking about an overview of how the face of private equity has changed recently, and what some of the key challenges will be for the future.

Helen: I know we're going to be joined by Ken Goodwin, who's a Partner in our Valuations Practice. What is Ken going to be talking about?

Dean: Well you know Helen, in today's current environment; Ken has some really good observations on what's happening in valuations, and what's changed. I think we all see the press, the headings out there around private equity, public companies, asset impairments, things of that nature, and I think Ken really has some real-life experience that will be good to hear.

Helen: Dean, another guest that's going to join us on Strategy Talks will be Mike Walke, and Mike Walke is a Partner with PwC, and he's also the Audit and Assurance Credit Crisis leader. Dean, what is Mike going to be talking to us about?

Dean: Helen, Mike's really going to focus on the impact on the accounting world in the current economic environment. I think he's really going to drill down on some of the financial reporting challenges that companies are facing, and offering the PwC perspective on solutions for addressing some of those challenges.

Helen: We also have Chris Dulny who is going to join us on Strategy Talks, and Chris is a Partner in the Assurance and Advisory services group at PwC. What is Chris going to be talking about?

Dean: He'll help shed some light on just how the economic downturn is affecting technology companies this time around, and what might be different. He's also going to stress the importance of continuing to invest in innovation, even though times are tough, and the benefits that that should bring tomorrow.

Helen: Dean, we've talked about a number of things. If listeners could take away only one piece of information from this podcast, what would it be?

Dean: I would say that as we go through these series of podcasts, to listen very carefully. While much of what you will hear will seem like common sense to you, unfortunately when people are close to the fire, it's often overlooked. So take heed, pay close attention, and re-look at your business with some of the advice you are hearing.

Helen: How are you helping your clients manage through these turbulent times? In our future episodes of Strategy Talks, we are giving all our partners an opportunity to give us their thirty second elevator speech about their practice area. So, how about you give us yours?

Dean: I think it's all about leadership. In environments such as this, there will be tough decisions, tough discussions, and we don't shy away from them. We'll give simple, honest, practical views, even if they are against conventional wisdom, or against what you necessarily want to hear. But we will give you our viewpoint and hopefully help you manage through to the other side.

Helen: Excellent, well thank you, Dean for joining us today and giving us your insights and advice. To learn more about the Restructuring and Distress Strategy group, and how PricewaterhouseCoopers can help your business through this economic crisis, please visit our Managing in a Downturn webpage at pwc.com/ca/managinginadownturn.

Voice over: Tune in next week for the second podcast in our series Restructuring in a Down Economy. Helen and Dean will talk with Dave Planques, leader of the corporate Advisory & Restructuring group at PwC. Dave will discuss some of the key differences between restructuring a company in good times, and in bad. Here's a sneak preview of what he has to say:

Dave: Yeah, it's tough. It used to be restructuring was relatively easy thing to do because there was always lots of money out there, so raising new money was always a big part of a restructuring. That's not the case anymore — in fact, it's the opposite; there's no money, and a lot of lenders that are involved in companies are trying to get their money back out.

Voice over: The following week, the third podcast in our series, How Will a Recession Affect the Value of my Business, will feature Ken Goodwin, a Partner in the Dispute Analysis & Evaluations group at PwC. Ken will talk about evaluations and how your business might be valued differently in a tight economy. Here's a sneak preview of what Ken has to say.

Ken: You know, evaluation is a matter of judgment, and as you put it, two corporate finance professionals or two evaluators are going to have a different opinion. I think what we try to bring to the table is a level of pragmatism — let's look at the facts, let's see what evidence is out there, and we have to make a decision based on the evidence that is there.

Dean: This concludes this episode of Strategy Talks, part of the PricewaterhouseCoopers Managing in a Downturn podcast series. I'm Dean Mullett, thank you for listening.

Helen: And I'm Helen Mallovy Hicks. We hope you'll join us again soon for another episode. To download or to subscribe to this podcast series or to find more information on this topic, please visit our Managing in a Downturn website at pwc.com/ca/managinginadownturn.

The information in this podcast is provided with the understanding that the authors and publishes are not herein engaged in rendering legal accounting, tax or other professional advice or services. The audience should discuss with professional advisors how the information may apply to their specific situation. Copyright 2009, PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or as the context requires, the PricewaterhouseCoopers global network or other member firms of the network. Each of which is a separate and independent legal entity.

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Hosted by Helen Mallovy Hicks, a Partner and National Leader of the Dispute Analysis & Valuations Group, Strategy Talks is a series of audio podcasts that explore key issues affecting businesses in Canada, and share strategies that companies can use to help address them.
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