The players

The turnaround market, it would seem, has more characters than a Fellini movie. Each plays an important role in this sprawling market, and each is eager not to be confused with the other, often deceptively similar protagonists.

In the mainstream private equity market, consultants and investors clamor to attach themselves to a company at every stage of its development and growth. On the flipside of growth, a different breed of consultants and investors seek out companies at every stage of the journey from weakness to insolvency to rebirth. What all these professionals have in common is a passion for finding value in distress. We've identified five different types of professional that offer their expertise in turnaround situations. Interestingly, it is not uncommon for all five to participate or even team up in the resuscitation of a single company.

The prognosticators. Accounting professionals are typically called in first to identify a problem, often at the behest of the banks. They analyse a company's balance sheet and can make recommendations on the next course of action, be it business-as-usual, debt restructuring, enacting an operations overhaul or liquidating the business altogether. Many of these groups also get involved in building consensus among creditors and stakeholders for a plan of action. Bob Ward, a partner at PricewaterhouseCoopers Business Recovery Services in London, warns that his firm's medicine is best taken sooner than later: ?A number of businesses are ignoring signs that their businesses could be facing a crisis situation. Rapid and early action, as soon as warning signs are detected, can help avert a crisis and enable a business to ride out the current downturn.?

The fixers. Where liquidation has not been chosen as a course of action, but where a company cannot continue as a going concern with an existing balance sheet, the restructuring specialists are called in. Not surprisingly, these services are frequently also offered by accounting firms that diagnose the problem. Restructuring firms work to resolve competing interests among debt and equity holders. They are adept at convincing one party to make a painful concession while bringing in new capital with the promise of uncommon value realisation.

The hired guns. A company with a new balance sheet but the same weak business fundamentals might be headed for bankruptcy. In the US, this means that Chapter 22 (which is, as one might guess, a repeat of a Chapter 11 bankruptcy), might beckon. A small handful of consultants specialise in injecting themselves into the operations of a company and working with, or replacing, management until the company has found the right path. It's messy work, but for companies that need operating as well as balance-sheet reorganisation, someone has to do it. As one operations specialist puts it: ?We have a strong prejudice against merely exchanging pieces of paper for other pieces of paper in a troubled company.? Turnaround management consultants get paid flat fees, performance fees and sometimes negotiate an equity stake in the company.

The paper chasers. If you've got a cut-price debt security, there exists a market full of distressed debt funds that want to take a look. Strategies in this world range from quick-flips to buy-and-holds. The best distressed debt funds lay claim to assets just as the competing claimholders are about to get washed out. The worst mistime and misprice debt securities and end up buying the rights to an empty shell.

The control freaks. These are investors who may seek control of a company either through its debt or through its equity, but either way they seek to effect change in a troubled business and, down the road, exit profitably. They're the turnaround pros with the most ?skin in the game.? However, acquirers of distressed companies are not averse to hiring highly incentivised turnaround consultants for specific projects. ?It's a merger between a turnaround firm and a private equity firm, and that's the structure you have to have in place to do this,? says Ross Gatlin, managing director and chief restructuring officer of Texas-based Insight Equity. ?We have a network of operators who are experienced turnaround pros that we parachute into whatever value-addition management role there is.?