- In this op-ed, Greg Knight, CEO of manufacturing firm GT Advanced Technologies, discusses how his company emerged from bankruptcy stronger.
- GT Advanced Technologies, based in New Hampshire, is a former supplier to Apple.
- Knight shares advice for executives who are plotting the path to post-bankruptcy success.
While high-profile bankruptcies like Sears and Toys R Us may grab the headlines, thousands of business entities across the United States quietly declare bankruptcy every month and the number is on the upswing. The most recent statistics from the American Bankruptcy Institute show that commercial Chapter 11 filings increased 75 percent in October 2018 on a year-over-year basis.
History shows only a fortunate few of these companies will actually emerge from Chapter 11. Reports and studies indicate that about 10 to 15% of Chapter 11 cases result in successful reorganizations. Ultimately retooling for growth and success is no small feat.
As the leader of a company fortunate enough to emerge from a restructuring, I believe there are valuable lessons to consider. The road to rejuvenating a brand includes many potholes that most bankruptcy advisors cannot predict or manage.
I know from experience that cleaning up problems from the past while positioning for future business success is exceedingly challenging.
Four years ago, GT Advanced Technologies was de-listed from Nasdaq. The previous incarnation of the Company had massively overextended itself in connection with a contract to manufacture and sell sapphire to be used in next-generation mobile phones. In a matter of weeks, the Company went from being a $2 billion market cap entity to bankruptcy.
The old GT Advanced Technologies didn't fade from the map, however. It came back from bankruptcy two years later with a new leadership team, a clean balance sheet and an entirely new business plan. We exited and monetized business segments and technologies which did not have a path for growth and doubled down on important technology innovations for the future. These included the perfection of a material called Silicon Carbide, which plays an important role in the growth of electric vehicles and the implementation of 5G technology.
The pieces have largely fallen into place for us as planned - except for the one caveat I will call the "bankruptcy hangover." Although we are a completely different company today, it's a lengthy process to remind customers and the capital markets of that reality.
For business leaders and advisors plotting the path to post-bankruptcy success, consider the following initiatives:
- Invest in Fence Mending. As dichotomous as it may seem, it takes money to go bankrupt. It can cost tens of millions of dollars in professional fees to guide a mid-size company through the bankruptcy process. Once a company emerges from bankruptcy, significant professional fees may still be incurred as the bankruptcy case can take years to close. Management continues to spend valuable time negotiating claim settlements with its creditors. This can cause havoc with your supply chain, especially if you plan on using the same vendor base going forward. Because an efficient process is critical to post bankruptcy success, consider this while the plan of restructuring is being developed and negotiations with financial stakeholders are taking place.
- Plan to Reintroduce Your Brand. Your legal, financial and investment banking advisors - while important - are largely limited to advising on their areas of expertise. There's usually no one in the room that is a "relationship advisor" to help mend fences with customers, investors, suppliers and other vendors whose debt or investment your old estate discarded during bankruptcy. In short order after emergence, these former stakeholders once again become current and potential stakeholders. Spend a significant amount of time on your company's brand positioning and perception.
- View Communications and Marketing as Business Priorities. Trust has been broken during a bankruptcy and must be re-earned. Reach out to continually communicate the new business plan and show how the new enterprise is committed to all stakeholders' success. This may be done through a new website, fresh content and ongoing engagement with friends in the media. Ultimately, trust is reestablished with successes - wins may start small and grow to larger significance - but many goals achieved along the way are steps that can be communicated and used to rebuild the foundations of trust.
In summary, don't fear evolving into a new company. Don't be afraid to proactively take the necessary steps in the early days of post-bankruptcy to prepare your enterprise and its stakeholders for what could be great things to come.
- Greg Knight is the CEO of GT Advanced Technologies, based in Hudson, New Hampshire