SEMESTER: Summer 19

COURSE NUMBER: EWMBA 236M.1 and EWMBA236M.2

Both sections of this course are dual listed with the EMBA program. The coursework is identical in each section.

COURSE TITLE: Turnarounds: Effective Leadership in Crisis

UNITS OF CREDIT: 2 Units

INSTRUCTOR: Peter Goodson

E-MAIL ADDRESS: petergoodson@good-assoc.com

CLASS WEB PAGE LOCATION (HTTP URL): TBD

MEETING DAY(S)/TIME:

EW236M.1: 9AM – 5PM, 6/17 – 6/21

EW236M.2: 9AM – 5PM, 7/8 – 7/12

PREREQUISITE(S): None

CLASS FORMAT: Cases, guest speakers

REQUIRED READINGS: Course Reader and Textbook

ANNOUNCEMENTS

· Recognize that this a 2 unit class where a semester’s preparation is done in advance of the first session and the class week will require your full attention.

· It is recommended to review the syllabus from last year so you have a clear understanding of what is expected in this course.

· There will be weekly deliverables due starting approximately 3 weeks before the start of the class (team assignments, individual assignments, readings, webinars).

· This course is conducted in a real world environment where your ability as leaders will be extremely tested and, as result, the Professor guarantees that your leadership ability will be enhanced measurably. Note: each of you will be challenged as there is no hiding in the course!

· Please understand that the final date to drop Summer Courses is May 1 (the final day of Summer Drops). Here is a link to a marketing 1 pager is available on the course, and an older Video link-- https://drive.google.com/open?id=137Ksx1AcxQz-7yvfqlXZaXb-c7r8PuT4

· The best selection filter is to talk to former students- some testimonials are in the marketing piece.

CAREER FIELD:

While the effects of a sea change in global economic conditions are still underway, one thing is certain; the number of troubled businesses will continue to multiply exponentially. The fast pace of competitive change, technological innovation and fickle customer attention have driven West Coast companies like Starbucks, Yahoo, Cisco and HP to utilize recovery tactics. Even Apple was raised from the ashes a number of years ago.

Concurrently, there has been a shift in private equity firms’ strategies from “buy low - sell high”, and profiting from financial engineering creativity using capitalizations to trigger returns. These historic methods have given way to a more popular theme of buying companies and affecting major operating improvements to drive value. Akin to a turnaround of a business, private equity firms are buying businesses in need of vast operating improvements to achieve hurdle rate returns. The flood of inexperienced PE competition, increasing desperation to acquire or forfeit investors’ capital, and cheap financing with limited concern for risk, has all resulted in driving record prices and lowered returns. This trend has forced an ever-increasing number of firms to become operating centric. Therefore, those entrepreneurs and managers with experience in successful turnaround leadership will own a career differentiator that has great value.

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:
This one week course is designed to introduce the student to the real world of operational and strategic turnarounds of troubled and underperforming businesses. We focus on the leadership practices that work in repairing flawed enterprises or fixing corporate investments that have gone off course. Our scope of distress will range from rescuing businesses in the grasp of a death spiral to breathing fresh air into sound, but underperforming, enterprises in order to create value. This course features the case method requiring you to fully engage and lead your classmates to find shared solutions. In almost all of our 16 cases your teacher was the change agent challenged with creating a new direction.

“Turnaround” is an often obfuscated term. This course is focused on developing the operational and leadership mindset, not the financial engineering or the legal perspective of either bankruptcy or the “negotiated” restructuring ordeal. We plan one class session discussing the restructuring and the legal process, followed by a case on the same topic. There has been a significant shift in workout practices due to the securitization of corporate loans, wherein the loan originators no longer own many of the distressed loans. As a result, the workout process has become increasingly dominated by workout representatives, vulture funds and lawyers (lots of lawyers), rather than operating managers, boards or existing equity holders. We have one quantitative day with a turnaround trainer to both develop your skills, in order to generate cash from underwater businesses, and to learn how to more effectively lead companies that are in trouble or are underperforming; the majority of our time being spent on the latter.

We will be linking together the functional disciplines of your core curriculum. What is different about this topic is the triage nature of these very desperate situations where the businesses are either rescued or end up dead. The leadership skill set in turning lemons into lemonade is unique; very unique! It is a very different world than in the setting surrounding business as usual management practices followed by healthy companies or even startups. The situations we will study span from companies that are facing extinction, to businesses that are stable but vastly underperforming in terms of shareholder value. We will engage you with large underperforming companies, smaller more entrepreneurial businesses in trouble, private equity acquisitions under pressure, as well as family owned and not for profit situations where key business operations were seriously threatened.

Below are the themes that we will be identifying throughout the course:

1. Early Warning Signs: recognizing the root symptoms of trouble before disaster

2. Diagnostics and Stakeholder Alignment: discovering the underlying problems, creating an investment thesis, comparing value creation with liquidation and building a case for change
3. Rescue Plan and Crisis Stabilization: the plan and critical first steps to stop the bleeding while achieving owner and/or lender alignment on a new operating charter to save a dying enterprise or improve an underperforming company
4. Leadership: taking charge, stabilizing crisis, restoring order and then building value
5. Management Buy In: culture adjustment and natural selection through getting keepers on board and disposing of non-contributors
6. Operational Improvements: initiatives to capture value through increasing revenue, improving margins and reducing structured costs
7. Strategic Transformation: once stabilized, creating a new opportunity to maximize value in new directions with a new scorecard
8. Bankruptcy and Workouts: a look at court supervised reorganizations

BIOGRAPHICAL SKETCH:

Peter Goodson is a pioneer in the private equity discipline as an early stage partner at Clayton, Dubilier & Rice. One of the first management buyout firms founded in 1978, the firm has purchased and transformed performance at over 70 large companies worth more than $100 billion through which CD&R assisted managements in enhancing value or replaced management to run the businesses themselves are prominent examples such as Lexmark (the former IBM Information Products business), the Uniroyal-Goodrich Tire Company and Hertz Rental Car. To highlight leadership capability, Operating executives at the firm today include Jack Welch the former CEO of GE and Sir Terry Leahy former CEO of Tesco.

Before joining Clayton, Dubilier & Rice, Professor Goodson was a Manager Director at Kidder Peabody & Co., where he founded the M&A Group at the age of 27. He personally participated in over 800 corporate assignments. Mr. Goodson was chosen by his partners to negotiate the $600 million sale of Kidder to General Electric, which he did, setting a record for the highest relative price paid for an investment bank on record.

Professor Goodson has taught as Haas for the last decade. He has also taught or lectured at Harvard, Wharton, Kellogg, Tuck, Stanford, NYU Stern, and Columbia. He was awarded the Earl F. Cheit Outstanding Teaching award by the students of Haas School of Business for several years running. He was also elected a fellow of Dartmouth’s Tuck Center for Private Equity and Entrepreneurship and holds the position of Distinguished Fellow at INSEAD in its Global Private Equity Initiative and the Emerging Market Institute also sponsored by the Singaporean Government.