By: Nick Mungor, Partner at Novo Advisors
Featured in SFNet Midwest Quarterly Newsletter, Q3 2024 Issue
In today’s ever-changing business environment, managing costs is a critical component of maintaining profitability, especially when faced with stagnant, declining, or unpredictable revenues. Many companies have grown reliant on their existing cost structures and find themselves paralyzed when the time comes to reduce expenses or reimagine their business operations to support lower revenue levels. This challenge has become more pronounced in the wake of COVID-19, which has drastically altered revenue streams for many businesses — sometimes for the better, but now settling back to reality, or “old normal”.
Accurate revenue forecasting has always been tough to predict, but the pandemic has amplified this difficulty. Companies have experienced revenue changes due to factors such as shifts in consumer spending, industry-specific market softness, and significant changes in their workforce. The uncertainty makes it hard for businesses to decide when to pull the trigger on cost reductions. Many have grown into their new, larger structures, making it harder to scale back on technology, personnel, or operations.
Read below as we dive into the critical importance of cost management, especially during periods of decreasing revenues. We’ll explore the procedures companies should have in place for managing costs and strategies they can take when action is necessary.
Nick Mungor, a partner at our firm, highlights a common situation he sees:
“Companies often struggle to grasp that if they were a $100 million revenue company but are now down 20%, they should not fixate on the decline. Instead, they should focus on the fact that they may now be an $80 million company, which they likely were a few years ago and operated well. By stepping away from the emotions and conducting a look-back exercise, they can identify what is needed to return to the efficient operations they had at $80 million. While some costs are harder to unravel, having a plan and taking action, even if disruptive initially, is almost always better than doing nothing.”
To navigate through these revenue downturns, businesses should consider the following strategies:
Businesses must remain agile and proactive in managing their cost structures amid uncertain revenue forecasts. By understanding costs, having contingency plans, and making informed decisions, companies can navigate through revenue fluctuations and maintain financial health. At Novo, we are committed to helping businesses navigate these challenges. We offer strategic guidance and practical solutions to reconfigure cost structures in ways that support long-term sustainability.
In today’s rapidly evolving healthcare landscape, AI is increasingly being leveraged to enhance decision-making, improve financial performance, and streamline operations. Kevin Neuman, Principal and Healthcare Practice Leader at Novo Advisors, brings over three decades of experience in healthcare performance improvement and restructuring. In this Q&A Kevin shares his thoughts on the role of AI in healthcare, the challenges organizations face when adopting these technologies, and the key lessons he’s learned from leading successful turnarounds. His expertise provides valuable guidance on how AI can be used to not only stabilize struggling healthcare organizations but also drive long-term success.
Kevin: I’ve spent 35 years working in healthcare, focusing heavily on performance improvement. My work has ranged from improving financial performance and implementing technology solutions, to working with physicians and care providers on the front lines. I co-founded Perigon, a business intelligence company aimed at improving decision-making in the healthcare supply chain, which was later sold to a Fortune 30 medical products distributor. My experience in improving healthcare processes naturally led me into restructuring — moving people and processes around and focusing on financial stability are all key components of this field.
Kevin: The first priority is understanding the capabilities of the management team. Can they execute the changes necessary? It’s crucial to assess their strengths and weaknesses. I often find that some individuals struggle to make the tough decisions required for significant change. Leadership needs to be responsible and decisive. Our role is to provide the expertise and support, but ultimately, the management team must be willing to act.
Kevin: AI has been around for a while, but at its core, it's about data science. In healthcare, AI helps organizations bring together vast amounts of data to make better, more informed decisions. It allows us to move from "good" to "better" by providing deeper insights. However, there’s a lot of hype and fear around AI, especially the misconception that it will take jobs. In reality, AI enhances jobs and allows people to do more with better tools. It’s important to understand AI’s potential but also be realistic about its limitations.
Kevin: AI plays a significant role in reviewing historical data and predicting future performance. In healthcare we deal with an overwhelming amount of data but often it's fragmented. AI helps bring that data together to identify where investments will yield the best ROI and pinpoint areas that are hurting the business. With AI, we can create a clearer financial roadmap to guide organizations on where to focus resources for the best outcomes.
Kevin: Change, particularly in healthcare, can be uncomfortable, especially for people who have been with an organization for a long time. The key is to help people understand the journey and why they are a critical part of it. You have to enable them to see how these changes will ultimately help them perform their jobs better and improve patient care. From a technical standpoint, it's about demonstrating how AI can enhance efficiency and outcomes, not replace people.
Kevin: One of the most important lessons is that healthcare has multiple stakeholders — shareholders, employees, clinicians, and patients — and each needs to be brought into the conversation. You need to be clear about everyone’s role and whether they want to be part of the future state. Understanding both the business and care sides of the equation is crucial for a successful turnaround.
Kevin: One of the best practices is to be willing to experiment. AI, like all technologies, is a journey. It’s important to understand the technology and manage the risks while testing how it can be applied. Have a clear plan in place but be open to learning and adapting as you go.
Kevin: AI is an evolution and not a revolution. It’s important not to rush into it out of fear of being left behind. Take the time to understand the technology and its potential before implementing it. Stay level-headed and avoid getting caught up in the hype. Be informed and realistic about what AI can do for your organization.
Kevin: I’d like to see a broader understanding of how AI can support specific organizational goals, particularly in healthcare. We need to explore how AI can improve patient care without losing sight of the "do no harm" principle. There’s still a lot to learn about AI’s long-term outcomes, and I’m hopeful we’ll continue to experiment and find new ways to enhance care and decision-making.
Kevin: Face it head-on with a clear plan. Don’t fool yourself about what AI can or can’t do for your organization. Be proactive and informed — do your research, experiment with AI solutions, and manage the risks. Start with a simple Google search, which can lead you to a wealth of information. AI changes rapidly, so it’s important to stay curious and continually learn how to apply it effectively in the future.
To learn more about AI and Kevin’s expertise, contact him at kneuman@novo-advisors.com.
You can also join Kevin and TMA Nashville as they team up for a panel on Tuesday, December 3, where he will lead a discussion on AI's impact on restructuring, particularly in healthcare, from both legal and operational perspectives. He’ll be joined by Ronald Rerko (Practice Director at Onix Networking Corp.), Dr. Galina Datskovsky (AI expert and OpenAxes board member), and Kevin Michael Mooney (Attorney and Senior Director of Enterprise Data Governance at the Cleveland Clinic Foundation). The panel will cover key legal considerations, including intellectual property, privacy, confidentiality, and strategies for future-proofing AI models.
Live and Virtual event:
Tuesday, December 3, 2024
12:00 PM - 1:30 PM CDT
Holland & Knight LLP
511 Union Street, Suite 2700
Nashville, TN 37219
A huge thank you to everyone who joined Novo Advisors for our 10th Annual Air and Water Event! It was a fantastic day filled with great conversation, stunning views, and, most importantly, the pleasure of spending time with our wonderful clients and friends. The Blue Angels were in true form and the weather could not have been more perfect. For those who couldn’t make it, we missed you and hope to see you next year. Your presence always adds something special to the event, and we look forward to sharing another memorable experience with you in 2025! From the entire team at Novo — THANK YOU for your support and friendship.
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Claudia Springer, a veteran in the field of restructuring and bankruptcy law and more recently business advisory in the restructuring space, has been leading Novo Advisors’ Philadelphia office and its new Mediation practice for just over three years. She also acts as Novo’s in-house counsel and frequently leads a small team in cases where Novo acts as receiver or assignee for the benefit of creditors or as a fiduciary (for example, a trustee of a liquidating trust). With over 40 years of experience, Claudia brings extensive expertise and a deep understanding of this field to the table. Her path from attorney to turnaround consultant highlights her adaptability, determination, and passion for the field. Read below for insights from our conversation with Claudia, where she shares her thoughts on current market trends and how her background as a practicing attorney has enabled her to successfully pivot from lawyer to restructuring strategist.
About Claudia Springer
Claudia’s legal career is marked by her tenure at the prestigious firms of Reed Smith LLP and prior to that Duane Morris, where she represented a diverse array of clients in high stakes restructuring and bankruptcy cases. Her clientele included debtors, major creditors, shareholders, boards of directors, creditors’ committees, landlords, buyers of assets, plan sponsors, bondholders, guarantors, and more. This extensive experience has equipped Claudia with a deep understanding of the intricate dynamics and challenges in the field of insolvency, spanning various industries from healthcare and pharmaceuticals to heavy manufacturing and retail. Notable cases like Allegheny Health and Education Foundation, National Steel, St. Vincent’s Catholic Medical Center, Erickson Senior Living, Vertellus Chemical Company, Boscovs Department Stores, the Philadelphia Orchestra, and Purdue Pharma highlight the array of industries that she is familiar with as well as her broad expertise and skill.
Claudia: I practiced law for over 40 years, and while I loved it and enjoyed success, I felt it was time to use my skills to transition into a different role for the remainder of my career. As a lawyer, I often provided business counsel and strategic advice. Clients retained me not only for my skills as a lawyer but also for my business insights and ability to map out solutions to thorny business issues. It seemed like the right time in my career and life to make a change to an area that called for a slightly different skill set but also made use of the knowledge I developed over my many years as an attorney. I went into this knowing I would have to work hard to prove I could successfully transition to the business side of restructuring, but I was prepared to make the time commitment to be successful.
Claudia: We’re seeing significant decisions from both the Circuit Courts and the Supreme Court impacting bankruptcy cases. One prime example is the recent Supreme Court decision in the Purdue Pharma case, where the court overturned a Second Circuit decision and ruled against the confirmed bankruptcy plan, a plan that shielded the Sackler family from liability for their role in the opioid crisis. There’s also a trend of smaller businesses opting to go the route of state and federal receiverships or assignments for the benefit of creditors to avoid the steep costs associated with Chapter 11 cases. While the bankruptcy arena has been very busy over the past few years, the out-of-court and state court alternatives to chapter 11 have also seen a significant increase in activity.
Claudia: I work with others at Novo to review and challenge historical and current data provided to us by the company and study aspects of the industry in which that business is involved. Transparency with the company’s lenders is crucial. Lenders don’t like surprises; they want to know the worst-case scenarios upfront and they usually want a timeframe for exiting the credit. Planning for the worst while aiming for a favorable outcome is essential. You always need a Plan B. When using bankruptcy to stop litigation or stabilize the business, it is vital to have an endgame planned. For example, if you want to use Chapter 11 to sell assets, you must also consider what happens after the sale. While many difficult issues cannot be worked out in advance of a filing, a road map for solving them should be developed beforehand assuming time permits.
Claudia: Recently we were retained as the Court appointed receiver for a trucking business. While the Company had been very successful for several generations, covid and other issues severely impacted its cash flow and its lender wanted to exit the credit. No other lender was willing to lend the amount needed to keep the business alive and equity was unwilling or unable to invest more money in the company. Equity did agree to place the business in a receivership so that an orderly liquidation of assets could occur with the hope that most creditors would be paid. Ultimately, we successfully negotiated with a wide variety of creditors regarding their claims and obtained a great result from an auction of the assets. We managed to pay all unsecured claims in full, other than the unsecured portion of the Bank claim. We negotiated with creditors, including landlords and employees, much like one would in a chapter 11 case. While we engaged outside counsel, much of the negotiation was conducted by a Novo team of two which included me.
Claudia: The legal and business aspects of restructuring are closely aligned. My legal background helps me provide business suggestions that consider the limitations that exist under current law. This dual perspective is beneficial for clients, as I can offer strategic advice considering both legal and business implications. I don’t try to be the lawyer for our clients, but my legal knowledge allows me to provide a comprehensive view on strategy and potential legal hurdles.
Claudia: During my legal career I was involved in numerous mediations but most often as a representative to one side of the dispute. Recently, I was retained by a decedent’s estate mired in debt, for the purpose of negotiating and mediating disputes between numerous creditors of the estate. After three years, all of the disputes were settled, and creditors received much more than most would have received had they continued to litigate their claims. Most cases can be settled successfully if parties are willing to make the effort and are amenable to compromising their positions in light of the risks and costs of litigation. For the mediator, one critical aspect to being effective is preparation and the ability to listen. Being tenacious also helps.
Claudia: One of the biggest hurdles we as restructuring professionals face is timing. Our clients often come to us when their situation is already grave and not easily reversible. Cash may be running out and the lender wants a quick exit. My advice is to address problems early and seek help sooner rather than later. While seeking help might seem expensive and is often viewed as an admission that the business is struggling, it is key to turning around a situation before it becomes irreversible. Time is not usually on your side, so acting early is crucial. Don’t wait to see the doctor when you know something is not right.
Claudia: If you have legal expertise in restructuring and are seeking to use that to pivot into business consulting, you need to be willing to take a few steps back before moving forward. You should be willing to devote the time to learning a different aspect of the field, although you will likely find, as did I, that having the legal expertise and the years of working alongside turnaround consultants, is a great advantage and provides a solid springboard from which to be successful. I have found the transition to be extremely rewarding, especially when we are able to resuscitate businesses that were on a downward slope.
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Claudia’s knowledge and experience in restructuring and bankruptcy are valuable contributions to Novo Advisors and its clients. Contact Claudia today at cspringer@novo-advisors.com or catch her at the upcoming Commercial Receivers Association conference on August 21st where she will be moderating the “Hot Topics” Panel.
Thank you to everyone who joined Novo Advisors for dinner and a show at nationally acclaimed The Second City in Chicago. It was an especially special night as the partners at Novo introduced our expanded team. The show was, as always, beyond impressive, and allowed us a chance to relax and laugh a lot! It's a great way for our team to meet our clients’ spouses and significant others and connect on a deeper and more personal level. Who is going to forget all of the folks from our group that were brought up on stage and asked to perform that night? We told you our consultants have many talents! At Novo, we always put the focus on building relationships, and thank you for the support!
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A huge thank you to the over 100 bankruptcy and turnaround professionals who joined us last month to celebrate our official NYC launch party at Ophelia Lounge in the historic Beekman Tower. The weather was perfect for the 360-degree terrace on the 26th floor showcasing NYC’s stunning Manhattan views. The food was flowing as were the cocktails, including Ophelia’s signature — the Purple Tuxedo. Novo Advisors’ current NY team includes Sandeep Gupta, Matt Cohn, Rob Vanderbeek, Kevin Neuman, and Claudia Springer. We hope to see you all at the next one!
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Chicago (October 12, 2023) — Novo Advisors, a premier turnaround consultancy serving middle market firms nationwide, is proud to announce new offices in Nashville and Minneapolis, adding capabilities to its team based in Chicago, New York and Philadelphia.
In Nashville, Dustin Bernstein joins Novo Advisors as a Managing Director. Dustin is a skilled financial consultant with more than 12 years of professional experience in industries including healthcare, manufacturing, hospitality, agriculture, metals and distribution. Prior to joining Novo, he held consulting positions at both global and boutique restructuring advisory firms, working with businesses from $20 million – $6 billion in sales. Earlier in his career, Dustin received his CPA designation in the state of Illinois. His expertise includes financial analysis, special situations, M&A, break-even analysis, business plan validation, liquidation analyses and cash flow forecasting.
We are pleased to welcome Dustin and Alex to the Novo family.”
Sandeep Gupta
Managing Partner, Novo Advisors
In Minneapolis, Alex Cariveau joins Novo Advisors as a Director. Alex brings more than 13 years’ experience working directly in functional financial roles — including Director of Finance — for manufacturing, entertainment and food and beverage businesses. His specialties include FP&A, cost accounting, working capital optimization, reporting and process improvement. Alex was also previously certified as a CPA in the state of Washington.
“We are pleased to welcome Dustin and Alex to the Novo family,” said Sandeep Gupta, founder and Managing Partner of Novo Advisors. “Both contribute special capabilities valued by our clients: Dustin for his background as a turnaround consultant, business advisor, investment banker and interim CFO; and Alex for his financial experience working across a wide arrange of industries.”
Novo Advisors is unique among many turnaround and restructuring consultancies in offering the expertise needed to serve in interim management roles, including CEO, CFO and COO. In addition to its varied industry experience, many members of Novo Advisors’ team apply direct, functional business knowledge and experience to initiate and speed turnaround and performance improvements for clients.
“The fact that we’re not career consultants, and that we can move from financial advisor directly to the C-suite when needed, benefits our clients,” notes Gupta. “Our grasp of the nuances of doing business is more comprehensive and grounded because of our functional experience — as is our ability to recommend and enact operational changes. And our ability to transition to interim management is efficient for clients since we are already steeped in the financial and operational details.”
Founded in 2012, Novo Advisors is a business transformation partner specializing in turnarounds and restructurings, performance improvement, transaction advisory, dispute resolution and interim management services for companies with $25 million – $1 billion in revenue. Novo offers clients rapid, customized solutions based on an immersive understanding of their business and financial issues, and the opportunity to work with a team of senior-level industry pros dedicated to delivering value every step of the way.
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For more information, contact Anupy Singla at (312) 961-2565 or Anupy@novo-advisors.com.
New York (October 2023) — Novo Advisors, a premier turnaround consultancy serving middle market firms, is proud to announce the expansion of its office in New York. Representing clients nationally from its Chicago headquarters and offices in Philadelphia, Minneapolis and Nashville, the growth in New York further extends the company’s services into the Northeast region.
Joining Novo Advisors to lead the effort to develop its business there are two New York-based experts, Matt Cohn, Partner, with 25 years’ experience managing both in-court and out-of-court restructurings, managing liquidity and developing business plans; and Rob Vanderbeek, JD, Partner, with more than 30 years of restructuring, performance improvement and due diligence as well as litigation, valuation and forensic experience. Both have successfully managed restructurings, Chapter 11 bankruptcies, sales processes and a host of financial matters for clients in numerous industries.
Highly regarded for the services provided by its seasoned consultants, the addition of Matt and Rob to the Novo roster fits the company’s long-term growth strategy.
“Both Matt and Rob bring unique talents to Novo. Matt’s restructuring and CRO experience and his extensive background with municipalities brings strength to our existing team as well as new capabilities in public finance. Rob’s background as an attorney, his work as a COO, in performance improvement and forensic analysis for complex cases will be extremely valuable to clients,” said Sandeep Gupta, Novo Advisor Managing Partner. “Having these two new experts onboard significantly enhances our bench strength.”
New York and the Northeast region are vibrant business centers. We are excited to bring our talents as trusted, collaborative partners to companies based there with our expanded team.”
Sandeep Gupta
Managing Partner, Novo Advisors
Matt and Rob join the current Novo team in the Northeast: Kevin Neuman, Principal and also based in New York, is a 30-year healthcare industry expert and successful entrepreneur specializing in operational improvement, financial stability, technology and analytics. Claudia Springer, Principal and head of the Philadelphia office, is an award-winning restructuring and bankruptcy attorney and mediator recognized for her strong business acumen.
“New York and the Northeast region are vibrant business centers. We are excited to bring our talents as trusted, collaborative partners to companies based there with our expanded team” said Gupta.
Founded in 2012, Novo Advisors is a business transformation partner specializing in turnarounds and restructurings, performance improvement, operations, transaction advisory, dispute resolution and interim management services. The company offers clients rapid, customized solutions based on an immersive understanding of their business and financial issues, and the opportunity to work with a team of senior-level industry pros dedicated to delivering value every step of the way.
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For more information, contact Anupy Singla at (312) 961-2565 or Anupy@novo-advisors.com.
Novo Advisors (Chicago) August 18, 2023: Thank you to everyone who made it to Offshore Rooftop to enjoy the Air & Water Event with us. If you were not able to attend, we missed you and look forward to seeing you next year.
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