In the past two years, I have had the good fortune to speak with a number of professionals in the turnaround industry (a group that includes attorneys, consultants, lenders, investment bankers, private equity investors, etc.). Most have stories of "ah ha" moments when they fell in love with the turnaround industry and the particular challenges corporate renewal offers. My own moment came when I secured an internship with the Turnaround Management Association's Chicago/Midwest chapter.

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	David Johnson

I first learned of TMA through a student group while studying for my MBA. The Chicago/Midwest chapter was looking for research interns, and a classmate and I agreed to collaborate on a research paper focusing on turnarounds in the retail industry. Under the guidance of seasoned professionals such as William J. Hass, then chapter president and a Certified Turnaround Professional (CTP), I learned to analyze financial statements through the lens of corporate distress.

My research internship sparked a fervent interest in turnarounds, and by the time I had completed my paper, I knew that my professional future lay in turnaround consulting. Seeking more experience, I reached out to members of the Pro Bono Committee, explaining that I was eager to volunteer for a project and that I believed my enthusiasm and ongoing accounting and finance studies would compensate for my lack of experience.

The Pro Bono program is a fantastic means for a student to gain vital experience. Troubled firms experiencing financial distress that meet certain parameters (under $3 million in revenue for for-profit firms, under $1 million for non-profits) are invited to apply for assistance. The Pro Bono Committee then selects candidates for actual assignments and solicits volunteers from the chapter membership. These projects offer the opportunity to work closely with other turnaround professionals, broaden one's experience, and perform a social service.

The project that I was assigned in June 2006 involved the wind-down of a local manufacturing firm. Sadly, the firm's founder and president had sought assistance too late, and the role of the team was to advise and assist with an orderly winding-down of operations. Irrespective of the late stage of decline the firm was in, working on this project provided me with an unparalleled opportunity to witness the nuts and bolts of a turnaround engagement.

With a three-person team, there was a considerable amount of work for everyone. My experiences on the engagement were diverse, ranging from participating in the discussion of strategic alternatives to developing a financial model for a potential new venture the firm's president was interested in launching. My enthusiasm was seen as an asset, and I was given the opportunity to see the real-world application of the accounting and finance skills I was developing in school.

After an arduous summer spent assisting in the development of a strategic plan at a local financial services firm, in addition to my work with the TMA, I believed I was ready to formally recruit with turnaround consulting firms. I had interned with the TMA during the school year, completed a finance-based internship over the summer, volunteered on a pro bono project, and just registered to take one of the three CTP exams.

Focus on Accounting

I quickly discovered during the interview process that regardless of the candidate, one question is always asked: how are his or her accounting skills? And this focus is no accident. While working in turnarounds certainly requires a broad set of skills, a firm grasp of accounting is absolutely crucial to success in this field.

I believe the focus on accounting skills is due to three traits inherent in turnaround work:

• Financial distress is usually an outcome of operational or capital structure issues (or both), and a deep knowledge of accounting gives one the tools necessary to determine the source of distress and begin to formulate appropriate solutions.
  
  
• The need to quantify distress (via measures such as the Altman Z-Score) and measure improvement is particularly acute in turnaround situations, when traditional measures of firm health such as revenue and net income may be of diminished usefulness.
  
  
• A strong set of accounting skills implies a highly detail-oriented individual, and this is an essential for success in the technical work of turnaround management. Through accounting, the history of a firm's distress can be revealed and analyzed, and hopefully solutions can be crafted

Given the nature of turnaround situations, it is understandable that senior professionals focus on the accounting skills of candidates. Based on my experience, except for those in the legal profession, I believe a formidable knowledge of accounting should be the price of entry for those who want to be involved in the turnaround industry.

About the Author:

David Johnson is an associate in the corporate advisory services practice at Huron Consulting Group. He recently received his MBA from the University of Chicago Graduate School of Business.

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