What are the lessons from the demise of Circuit City? Since I no longer work on the front lines of the Restructuring world (my consulting is focused on assisting Restructuring practices of leading professional service firms), I can't offer any insights into the nuances of the collapse of Circuit City. But, I am absolutely convinced that their are forces at work that go beyond the unique elements of the Circuit City case.
I have been struck by the many commentators who would suggest that the cause of this rash of liquidations is the changes to the U.S. Bankruptcy Code enacted with the Bankruptcy Reform Act of 2005 (BAPCPA). I was encouraged by the recent article questioning this view by Bob Duffy, Senior Managing Director of FTI Palladium Partners. Bob's article, Broken Beyond Repair, appeared in the December (2008) issue of the Journal of Corporate Renewal, and does an excellent job of laying out the factors that are more accurately the cause for all of the liquidations in the retail sector.
The implications of the liquidations of retailers goes far beyond the retailing industry. I believe that
we will see a much higher percentage of liquidations, in a variety of industries, than we have seen in our life times.Such an occurrence will have significant impact on the work of professionals in the Restructuring profession.
Are we at the point that the Turnaround Management Association should consider a name change to the Liquidation Management Association?
Coming next: In tomorrow's post, The Lost Art of Turnarounds, I will share my own view as to why liqidations are becoming more prevalent.
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