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CEO on lessons learned from bankruptcy

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Toys r usAP/Julio
Cortez

  • 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

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