Mr Fix-it of the bottom line on a mission to Asia
From Levi Strauss to Calvin Klein, when it comes to turning around an ailing firm, Tony Alvarez has got it tailor-made
TONY ALVAREZ IS a fix-it man on a grand scale. He mends broken companies.
A list of the businesses he has helped put back on their feet over the last 20 years reads like a roll-call of corporate America: Warnaco, the owner of Calvin Klein underwear; Interstate Bakeries, the company responsible for Wonder Bread and Twinkies, and jeans-maker Levi Strauss, among others.
Now the consultancy he heads, Alvarez & Marsal, is aiming to offer the same sort of restructuring service to companies in Asia. Although each troubled company might seem different, Mr Alvarez believes their problems are often much the same and that the process of remedying them can be standardised.
'They all think they have unique and intractable problems,' he says. 'But the process of attacking the problems is common. Some companies take a lot longer than others to fix but every company I've worked with personally since 1983 has been turned around.'
When Mr Alvarez is called in, often by an indebted company's creditors but sometimes by the corporation's own managers, the first thing he does is make sure there is enough cash coming in to keep the business ticking over, at least for the time being. Then he works out a viable sales plan and cuts back costs to a level that fits the projected sales. 'There's nothing fancy or scientific about it. It's just blocking and tackling,' he says.
It may not be fancy but it does work. Time and again Alvarez & Marsal has been called in when a company seems to be on its last gasp, only to depart a year or so later leaving behind a thriving, although often smaller, business.
Now, the 57 year-old Mr Alvarez is looking to expand beyond his usual line of work with troubled US corporations. In July, Alvarez & Marsal won a contract to turn around the crumbling New Orleans public school system; a job since made a lot more challenging by Hurricane Katrina. Also in July, the firm hired an 80-strong corporate advisory team from Hong Kong-based accountancy RSM Nelson Wheeler, massively expanding its presence in Asia.
'We are determined to become a global company and you can't do that without being in Asia,' he says. Even so, Mr Alvarez acknowledges it may take a long time for Asia's largely family-run companies to warm to his particular style of corporate restructuring. 'It might take two or three successful turnarounds to convince the community here that the beneficiaries of what we do are not only the creditors but also the families themselves.'
Unlike other turnaround experts, Mr Alvarez does not invest his own money in the companies he advises. 'We are fixers, not owners,' he explains. 'You can't be both principal and agent in a transaction. How would you maintain your objectivity?'
Although he does not invest, Mr Alvarez does often take an executive position in the companies he works with, sometimes as chief executive. Once he has got his feet under the desk and assessed the company's liquidity position, the next thing is to get a thorough understanding of the business and its problems, a step he says usually takes between one and three months. Then, once he has devised a rescue plan, he has to persuade all the different stakeholders in a company - creditors, shareholders, workforce - to go along with it, hence the importance of remaining objective.
'Our role is as facilitators. We get people to agree.'
Often, the problems are similar. In the case of Levi Strauss, where Alvarez & Marsal was invited in by the existing management, 'the company had lost market share over time but retained the fixed-cost base to support the higher level of sales', explains Mr Alvarez. 'It needed to be right-sized.'
Often, right-sizing means cutting staff and Mr Alvarez does not shy away from going down to the shop floor and addressing workers personally. 'I talk straight to people and tell them what I'm going to do,' he says. 'It is never a painless thing to make a company more efficient. I personally take no pleasure from the part of the job that involves losing jobs but you need to do it in some companies.'
Restructuring may also involve persuading a company's owners and managers to sell off treasured assets. 'Generally speaking, we like to hold on to the assets with the best potential for increasing their value over time,' Mr Alvarez explains. The others can be sold off in order to buy valuable time to rescue the company. 'We go through every line item on the balance sheet and ask whether this is a 'nice to have' or a 'need to have'.'
In the case of Interstate, a company with US$3.5 billion in revenues, Alvarez & Marsal has cut costs, sold off unprofitable bakeries, redesigned the products' packaging and ramped up marketing. The job is taking longer than it would in other companies, says Mr Alvarez, because every move has to be negotiated with Interstate's employees' 550 different labour unions. Even so, he is confident of ultimate success. 'It takes a lot to kill a good brand,' he says.
Mr Alvarez argues the methods he has developed for turning around problem companies can also work in the public sector. He believes that running schools, for example, has a lot in common with running a chain of retail stores and has drafted in Alvarez & Marsal managing director and former Brookes Brothers chief executive Bill Roberti to advise on restructuring the New Orleans school system.
Although he seems ready to restructure anything, Mr Alvarez does draw the line somewhere. 'I don't do governments. Managing boards is one thing, managing Congress is another.'
On the other hand, he could be persuaded to change his mind. 'I have a genetic disease: I'm a deal junkie,' he says. 'I always say no until someone shows me the excitement of the hunt.'
A native of the Philippines, Antonio 'Tony' Alvarez moved to the United States in his early twenties and soon rose to head the corporate restructuring unit of accountancy firm Coopers & Lybrand. In 1981, he joined Norton Simon, where he met his long-time business partner, Bryan Marsal, who had previously managed a loan recovery team for Citibank. In 1983, the two left to found their own specialist restructuring company.
Since then, Mr Alvarez has played corporate surgeon to a string of big US companies, serving as chief executive of clothing company Warnaco, president of troubled health-care giant Republic Health and more recently as strategic adviser to Levi Strauss. His company opened its Hong Kong office in 2003.