Finance
Poor economy keeps consultants hopping
Philadelphia Business Journal - by Andy Gotlieb
While businesses struggle these days in a challenging economy, Nachman Hays Consulting Inc. of Narberth finds its prospects at an all-time high.
Founded in 1982, Nachman Hays assists underperforming and otherwise troubled companies in getting back on their feet, whether it's serving as interim management, engaging in cost-cutting, arranging refinancings, locating merger or acquisition partners or, as a last resort, filing for bankruptcy.
There's always a sense of urgency in the turnaround industry.
"We typically run and shoot," said Howard Brod Brownstein, a principal. "We sometimes characterize ourselves as battlefield surgeons. There's no time for anesthetics or X-rays."
"This is a very passion-oriented business," agreed fellow principal Harvey L. Nachman. "You have to love it or you burn out quickly. Every day you face a crisis."
Nachman Hays, which also has offices in Cleveland and New York, typically focuses on companies with less than $500 million in sales. Those includes companies in every field, excluding government.
Brownstein said industry-specific knowledge isn't required because most companies face the same problems -- over- or undermanagement.
Often that poor management stems from a company focusing on revenues, Nachman said. Too often, management shoots for a certain revenue goal to impress country-club friends, while generating little profit.
Considering that Nachman Hays has done 40 percent more business this year than last, there apparently is plenty of poor management to be found.
A key to being effective in turnaround, Nachman and Brownstein say, is a willingness to make the tough recommendations. Those don't always sit well with management, especially when an executive has to give up one of his two Porsches or must remove a spouse from the payroll.
"Some of these clients lettered in angry," Brownstein said, adding that clients often resist implementing all the recommendations -- even when the company's own staff typically provided the solutions. "If we're not going to be listened to, we leave."
Management troubles may remain the same over time, but some issues do change. Nachman noted the repair process sometimes is more difficult now because the collateral values of equipment have declined.
Then there are the dot-com and technology companies, which typically have limited assets. After selling off inventory and real estate, there may not be much left to do.
"Sometimes companies are already dead and someone's got to come along and sign the death certificate," Brownstein said.
Still, Nachman Hays tries to avoid bankruptcy or liquidation where possible. Sometimes, a company can be resuscitated enough that other options emerge. Those could include a merger with a bricks-and-mortar company or a pairing with a healthier dot-com.
More often than not, the client survives, Brownstein said.
"We bring them back alive," he said. "Sometimes, though, they look like a poodle just back from a haircut."
Berwind squared
The battle of Berwind is over, at least for now.
U.S. District Judge Herbert J. Hutton Jr. dismissed a lawsuit filed by David McMichael Berwind against his brother, Berwind Group Chairman C.G. Berwind Jr.
David Berwind, who lives in Massachusetts, alleges he wasn't paid fair market value for shares of a company now controlled by his brother. He said his brother eliminated his trust fund's minority interest in Berwind Pharmaceutical Services Inc. by means of a "cash-out" merger. The merger converted the trust fund's shares of common stock in the drug subsidiary into a subordinated promissory note worth $82.82 million.
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