Diagnosing Turnaround Potential

– Defining the Challenges & Future Path  

“Troubled Companies” – by definition the universe of troubled companies are businesses under financial stress; typically over-leveraged and unable to meet debt service commitments.

There are Three Basic Response Options in any Troubled Situation:

  1. Cut your losses and exit promptly.
  2. Reallocate the interests (ie restructure the debt and equity) and move forward.
  3. Change the course of operational results to increase the value.

Obtaining a rapid, reliable, fact-based assessment of the business’ situation and viability is the critical First Step in addressing any “Troubled” or “Workout” situation.

An Accurate Problem Diagnosis is critical to assessing risk, reward and turnaround potential.

Third party assistance in this Diagnosis Process can be highly valuable in facilitating an objective and open-minded perspective during this review. 

Kestrel treats each new assignment as a unique problem solving challenge, focusing upon maximization of value as the primary goal and using our extensive experience and exclusive focus upon distressed businesses to bring valuable insights and pattern recognition as well as objectivity to the evaluaton and analysis process.

Area of Review and Analysis  /  Key Diagnosis Objectives

 Liquidity and Cashflow

  • Develop data to manage cash crisis
  • Determine potential source(s) of liquidity
  • Install interim cashflow management controls

Management Interviews

  • Maximize access to and utilization of existing corporate knowledge
  • Obtain and compare Senior and Middle-Management views on key issues
  • Evaluate management and the consistency of its strategy
  • Identify potential solutions to business problems 


  • Analyze where business is making and losing money
  • Identify specific internal business process problems
  • Understand profit improvement potential

Competitive Environment

  • Understand industry in which business competes
  • Identify key competitive strengths and weaknesses
  • Evaluate market risks and opportunities relative to competitors

Organization and Business Processes

  • Evaluate management strengths and weaknesses
  • Compare suitability of business processes to strategic requirements
  • Understand position in organizational life-cycle