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Archive for March, 2020

THE GREAT RESTRUCTURING OF 2020

 

What we know so far!

  • The Chinese Coronavirus has fundamentally changed the world and United States economies with unprecedented speed.
  • In some cases, those changes will be temporary. In many cases, those changes will be permanent.
  • The unintended and unforeseen consequences of the crisis will ripple through all aspects of the world and United States economies for many years.
  • The economic relationships between debtors (individuals, companies, governments) and creditors (vendors, lessors, lenders, employees) and owners (equity holders) are now fundamentally unbalanced, just as has occurred in all previous financial crises.
  • As in the Dotcom Crash, the 9/11 Crash and the 2008 Crash, those economic relationships will be rebalanced by renegotiation, sale, bankruptcy and liquidation, so that assets are redeployed, asset value is monetized and maximized and economic activity can continue. We know that there will still be airlines, travel companies, restaurants, oil companies, auto manufacturers, etc. We do not know which companies will survive or who will be their owners. For example, Boeing will likely still exist, but Boeing equity and debt holders may be hurt severely.
  • The world has survived far worse and has revived strongly. For example, World War I, followed by the Spanish Flu, followed by the huge economic growth of the 1920’s. Humans are wired to adapt to and to overcome hardship. We still have the land, resources, infrastructure, intellectual property, technology and talent that we had a month ago. Huge economic dislocation can also spur huge creativity, energy and innovation.
  • There will be major economic losers, but also major economic winners.
  • The United States is self-sufficient in food and energy and is the largest market and the greatest economic and political safe haven in the world. We are the best-positioned country in the world to emerge stronger than before.

What we do not know!

  • How bad the Chinese Coronavirus will get.
  • How long it will take for it to resolve. For example, the 1918 Spanish Flu came in waves and there is high expectation that the coronavirus will reappear this fall.
  • How bad the economic situation will get before it stabilizes, both in the short term and long term
  • The effect of historically unprecedented government economic stimulation and significant increase in the deficit.
  • The availability of cash to sustain under-performing companies and businesses.
  • How young CEO’s, investors, bankers will react to a situation that they have not seen or lived through before.

What happens next?

  • Everyone we know is sheltering in place and is shocked at the magnitude and speed of this world change. People need time to adjust to a radical new reality, and they have not yet had that time.
  • It is almost impossible to make any future predictions, however the most immediate business decisions will be critical given the extreme level of uncertainty.
  • We expect that the world health and economic situation will become clearer over the next few months. We expect to see a giant wave of economic restructuring that will last several years.
  • Early business crises will be driven by lack of cash. Based on our experience in several previous economic crashes, the speed with which business owners and managers face reality, preserve, protect and forecast cash and take effective action will determine which businesses survive and which die.

 

WHAT YOU CAN DO AS A BOARD MEMBER, INVESTOR, LENDER OR STAKEHOLDER … 

  • It is critical for companies, investors and lenders to face reality and act quickly. When things are going bad, waiting seldom improves the situation. In over 40 years of crisis management and restructuring experience we have never seen a board of directors act too quickly when faced with a crisis. We have all too frequently seen a board act slowly or not at all.
  • Implement cash flow, receivables and inventory reporting so that you are alerted to problems early.
  • Gerbsman Partners believes that companies, investors and lenders should to call for assistance early. The earlier professionals can get involved in the process, the better the potential outcome in maximizing enterprise value.  Again based on experience, boards, investors and lenders request assistance only after a company has little cash or is out of cash. Many more options exist to maximize enterprise value if a company has some running room.
  • Focus on the control, preservation and forecasting of cash on a weekly, monthly and quarterly basis.
  • Require “bottoms up” forecasting for all aspects of cash, revenue and expense. Have the CEO and CFO defend all numbers.
  • Hold the CEO responsible and accountable for performance. Re-forecast your business plan based on the reality of “what is” today with large margins for uncertainty.
  • Communicate frequently with all parties at interest. Check that the CEO is providing leadership, motivation and morale to the management team and employees.
  • Review all companies in your portfolio. Identify and define action plans to fix weaknesses now.

 

! CALL GERBSMAN PARTNERS NOW AND  GET AHEAD OF THE CURVE.

Crisis Management and Restructuring to Maximize Enterprise Value is our Business!

 

ABOUT GERBSMAN PARTNERS:

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 103 technology, medical device, life science, digital marketing, information & cyber security and solar companies and their Intellectual Property and has restructured/terminated over $810 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in San Francisco, New York, Virginia/Washington DC, Boston, Europe and Israel.

 

Steven R. Gerbsman – Principal steve@gerbsmanpartners.com

 

Robert R. Tillman – Member of Gerbsman Partners Board of Intellectual Capital

 

 

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How to Maintain a Professional Appearance While Working From Home

Wearing pajamas is not the answer to staying productive.

By Lauren A. RothmanStylist and fashion expert
Getty Images

The way we dress impacts our performance. There is so much in this world we cannot control and one daily routine we can practice at home is getting dressed with intention. My best advice: don’t just dress from the hip up for your next video conference call.

When I style clients we talk about strategies that make you feel empowered and confident, like you own the room. As our new normal starts to shift and you find yourself working from home more often, define the look of your most productive self as you move from your home office set up to your exercise and beauty routines.

During a time when you can feel easily overwhelmed, it is more important than ever to practice self-care. It can be uplifting to be fully awake and engaged in a home setting. Self-care requires practice and many of us now have plenty of newly unplanned time to perfect this art form.

Here are my top self-care style tips to help you stay productive and professional:

Make sure your hair is tempered.

This sounds so simple yet many people undervalue the importance of hairstyles at home. If you are spending any time teleconferencing, keep in mind that a polished appearance remains valuable.

Frizzy hair is a common distraction on video but can be very easy to tame with hairspray or product. Spray your comb or your hands with product and run it through your locks. If you are so inclined, explore the many available online tutorials. You can also sleep with your hair in a bun or a braid for a low key yet fun look — you don’t need a professional blowout to look successful.

Define your work-from-home routine.

Don’t underestimate the power of looking well-rested. This is the time to go through any free samples of skincare products you have collected over time. Focus on maintaining healthy looking, glowing skin instead of perfecting a Saturday night smokey eye (unless that’s your thing).

Also, moisturize. It is still cold in parts of the country and we’re all pumping the hand sanitizer — many of my clients report dry skin as one of their biggest beauty challenges. Try a face mask or pack of nail stickers.

Continue to wear your contacts or find some blue light eyeglasses that could help you feel more comfortable and refreshed. Daily makeup routines are also evolving, but some people, myself included, find that makeup helps us wake-up. If stress and anxiety are keeping you up at night, fake it on your next video work call and wear concealer and lipstick. It is easy to look washed out on video calls and a little makeup goes a long way. Try focusing on creating an even skin tone, highlighting your eyes to help keep your audience engaged and wearing a lip color that complements your coloring.

Practicing self-care can be like caffeine and is a terrific way to supercharge your day.

Shop your closet.

Working from home could give you an opportunity to wear pieces in your closet that still have tags. Break in the new shoes you pre-ordered for spring. Stretch out your white jeans from last summer while you sit at your desk. Purge, edit and store winter pieces you will no longer wear this season.

Organize your closet, the hallway coat closet, your toiletries, and your office. If you usually go barefoot at home (as many of us do) identify your work-from-home shoes. Find your perfect heel height that helps you feel on duty and ready to face what comes your way. Getting dressed helps us feel more accountable and wearing shoes can help us remember we are meant to be doing something productive. Don’t dress uncomfortably, but also possibly don’t plan on wearing your sports bra every day for a month either.

Build a capsule wardrobe.

Designate a section in your closet for grab and go wardrobe essentials that will appear professional over video conference. While you may be able to work from home in your pajamas, you definitely don’t want to wear them on Zoom calls with your boss. It may seem obvious, but wear undergarments and shop your closet for solid colored tops and appropriate pants. I’ve had too many clients unintentionally stand up during a video call when a child, spouse or roommate walks into a designated work space without warning.

Channel your personal brand as you curate your video conference capsule wardrobe and work from home outfits. You may be able to pop onto social media broadcasting from your bed wearing workout gear, but avoid doing this on a business video chat. Avoid busy patterns or shirts with writing that will be distracting. You can show off a hint of personal style with interesting collars, colors, earrings, and shorter necklaces.

If you’re now working-from-home for the first time, it’s good idea to use this newfound time at home to discover and update routines. Some are hunkering down to cocoon, others are balancing working from home while parenting and many of our past patterns are shifting. Wearing your pajamas endlessly is not the answer. This is not a staycation or a singular sick day — this is our foreseeable new normal. It’s a luxury to work from home while so many essential workers continue to commute and risk their health. Find your new favorite outfit that is both comfortable and professional and get yourself dressed.

Published on: Mar 23, 2020
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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Terminating/Restructuring Prohibitive Real Estate, License, Payables & Contingent Liabilities

Gerbsman Partners has been involved with numerous national and international equity sponsors, senior/junior lenders, investment banks and equipment lessors in the restructuring or termination of various balance sheet issues for their technology, life science, medical device, cyber security, solar and cleantech portfolio companies.

These companies were not necessarily in crisis, but had cash (in some cases significant cash reserves) and/or investor groups that were about to provide additional funding. In order to stabilize their Go-Forward-Plan and maximize cash resources for future growth, there were specific needs to address Balance Sheet and Contingent Liability issues as soon as possible.

Some of these areas where Gerbsman Partners has assisted, these companies have been in the process of termination, restructuring and/or reduction of:

Prohibitive Executory Real Estate Leases, Computer and Hardware-related Leases and Senior/Sub-debt Obligations

 Gerbsman Partners was the “innovator” in creating strategies to terminate or restructure prohibitive real estate leases and senior and sub-debt obligations.

To date, we have terminated or restructured $810 million of such obligations for private and public companies, and which has allowed them to return to financial viability.

Accounts/Trade Payable Obligations

Companies in a crisis, turnaround or restructuring situation typically have account and trade payable obligations that become prohibitive for the viability of the company on a go-forward-basis. Gerbsman Partners has successfully negotiated mutually beneficial restructurings that allowed all parties to maximize value based on the reality or practicality of the situation.

Software and Technology-related Licenses

As per the above, software and technology-related licenses need to be restructured/terminated in order for additional capital to be invested in restructured companies. Gerbsman Partners has a significant, successful track record in these areas.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in underperforming, undercapitalized and undervalued companies and their intellectual properties. Since 2001, Gerbsman Partners has successfully maximized the values of 108 companies in a wide and diverse spectrum of industries. In the process, GP has successfully restructured/terminated over $810 million of real estate executor contracts and equipment lease/sub-debt obligations, and has assisted in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington DC, McLean VA, San Francisco, Orange County, Europe and Israel.

 

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Coronavirus: The Black Swan of 2020

Here is a note that we sent to Sequoia founders and CEOs today to provide guidance on how to ensure the health of their business while dealing with potential business consequences of the spreading effects of the coronavirus.

Dear Founders & CEOs,

Coronavirus is the black swan of 2020. Some of you (and some of us) have already been personally impacted by the virus. We know the stress you are under and are here to help. With lives at risk, we hope that conditions improve as quickly as possible. In the interim, we should brace ourselves for turbulence and have a prepared mindset for the scenarios that may play out.

All of you have been inundated by suggestions for precautions to take around COVID-19 to protect the health and welfare of you, your employees, and your families. Like many, we have studied the available information and would be happy to share our point of view — please let us know if that is of interest. This note is about something else: ensuring the health of your business while dealing with potential business consequences of the spreading effects of the virus.

Unfortunately, because of Sequoia’s presence in many regions around the world, we are gaining first-hand knowledge of coronavirus’ effects on global business. As with all crises, there are some businesses that stand to benefit. However, many companies in frontline countries are facing challenges as a result of the virus outbreak, including:

  • Drop in business activity. Some companies have seen their growth rates drop sharply between December and February. Several companies that were on track are now at risk of missing their Q1–2020 plans as the effects of the virus ripple wider.
  • Supply chain disruptions. The unprecedented lockdown in China is directly impacting global supply chains. Hardware, direct-to-consumer, and retailing companies may need to find alternative suppliers. Pure software companies are less exposed to supply chain disruptions, but remain at risk due to cascading economic effects.
  • Curtailment of travel and canceled meetings. Many companies have banned all “non-essential” travel and some have banned all international travel. While travel companies are directly impacted, all companies that depend on in-person meetings to conduct sales, business development, or partnership discussions are being affected.

It will take considerable time — perhaps several quarters — before we can be confident that the virus has been contained. It will take even longer for the global economy to recover its footing. Some of you may experience softening demand; some of you may face supply challenges. While The Fed and other central banks can cut interest rates, monetary policy may prove a blunt tool in alleviating the economic ramifications of a global health crisis.

We suggest you question every assumption about your business, including:

  1. Cash runway. Do you really have as much runway as you think? Could you withstand a few poor quarters if the economy sputters? Have you made contingency plans? Where could you trim expenses without fundamentally hurting the business? Ask these questions now to avoid potentially painful future consequences.
  2. Fundraising. Private financings could soften significantly, as happened in 2001 and 2009. What would you do if fundraising on attractive terms proves difficult in 2020 and 2021? Could you turn a challenging situation into an opportunity to set yourself up for enduring success? Many of the most iconic companies were forged and shaped during difficult times. We partnered with Cisco shortly after Black Monday in 1987. Google and PayPal soldiered through the aftermath of the dot-com bust. More recently, Airbnb, Square, and Stripe were founded in the midst of the Global Financial Crisis. Constraints focus the mind and provide fertile ground for creativity.
  3. Sales forecasts. Even if you don’t see any direct or immediate exposure for your company, anticipate that your customers may revise their spending habits. Deals that seemed certain may not close. The key is to not be caught flat-footed.
  4. Marketing. With softening sales, you might find that your customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending to maintain consistent returns on marketing spending. With greater economic and fundraising uncertainty, you might even want to consider raising the bar on ROI for marketing spend.
  5. Headcount. Given all of the above stress points on your finances, this might be a time to evaluate critically whether you can do more with less and raise productivity.
  6. Capital spending. Until you have charted a course to financial independence, examine whether your capital spending plans are sensible in a more uncertain environment. Perhaps there is no reason to change plans and, for all you know, changing circumstances may even present opportunities to accelerate. But these are decisions that should be deliberate.

Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances. In downturns, revenue and cash levels always fall faster than expenses. In some ways, business mirrors biology. As Darwin surmised, those who survive “are not the strongest or the most intelligent, but the most adaptable to change.”

A distinctive feature of enduring companies is the way their leaders react to moments like these. Your employees are all aware of COVID-19 and are wondering how you will react and what it means for them. False optimism can easily lead you astray and prevent you from making contingency plans or taking bold action. Avoid this trap by being clinically realistic and acting decisively as circumstances change. Demonstrate the leadership your team needs during this stressful time.

Here is some perspective from our partner Alfred Lin, who lived through another black swan moment as an operating executive:

“I was serving as the COO/CFO of Zappos when I was summoned to Sequoia’s office for the infamous R.I.P. Good Times presentation in 2008, prior to the financial crisis. We didn’t know then, just like we don’t know now, how long or how sharp or shallow of a downturn we will face. What I can confirm is that the presentation made our team and our business stronger. Zappos emerged from the financial crisis ready to seize on opportunities after our competitors had been battered and bruised.”

Stay healthy, keep your company healthy, and put a dent in the world.

Best,

Team Sequoia

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7 ‘Revival’ Trends You Can Actually Wear to the Office Right Now

Shop your closet for these 90’s inspired looks that you never pitched last decade

By Lauren A. RothmanStylist and fashion expert
Getty Images

What’s old is new again and the top trends for this century’s roaring 20’s are very 90’s inspired. Oversized blazers, mom jeans, bodysuits, combat boots, crop tops, crochet, and padded headbands are everywhere. However, just because dress codes are slacking across the country, do yourself a favor and don’t walk into a boardroom looking sloppy, unpolished or unaware of your audience.

Spring is on the horizon and my clients want to know what to wear this time of year. Winter is in full effect yet stores are blooming with next season’s looks. Here’s a rundown of 7 revival trends that are stylish and safe for work.

1. Fleece

Once a material reserved for the outdoors and Silicon Valley techies, fleece has gotten a makeover. From tailored pieces to chic sweater styles, this cozy material can take you from your couch to the office. Try a trendy zip-up or blazer style in a bright color or muted animal print paired with dark denim and booties on your next casual Friday instead of the traditional fleece vest.

2. Polka Dots

This classic pattern is perfect for the office. A welcome change from floral patterns we typically see at this time of year, polka dots are spring’s version of houndstooth. It is one of the rare flattering patterns that works universally on many body types. Try it as a wrap dress or silky blouse while guys can add a pop of pattern on their socks or pocket square. You will start to see it in many stores this spring but you may also be able to shop your own closet.

3. Brights

Color is everywhere. Spring often blooms an inner release from the boredom of everyday neutrals. Brights are popping up and there is a color in style for everyone. Whether you add a shoe in Pantone’s shade of “classic blue” to your wardrobe or indulge in reds, pinks, and purples you are sure to make your audience smile in these happy tones. For an extra bold look, dip into the neon highlighter reel and choose one piece to wear to work.

4. Micro Bags

If you’re not using your phone to pay for everything and actually want to carry lip gloss, keys, or on-the-go essentials next time you run out for a coffee break, invest in this trendy bag. Its predecessor, the wristlet, still lives on but these micro bags are often miniature versions of your favorite handbag styles. They are a versatile, easy travel accessory that is sure to bring endless compliments.

5. Matching Separates

One of my personal favorites, these outfits are the perfect hybrid between business attire and business casual. Matching separates create a polished look and there is no need to add a jacket. Look for coordinating basics in neutral tones to lengthen your shape or stand out in a column of color. Dressy but not stuffy, this trend is easy to wear and will help you exude executive presence without looking like you’re trying too hard.

6. Leather

This fall trend has major staying power. In any of its iterations, ranging from couture vegan leather to shiny fabric that is leather inspired, this material is popping up head to toe. Men will find leather piping along blazers or sweaters while women will see any number of pieces competing for attention. Shop this trend carefully and avoid pleather that looks too shiny or squeaks.

7. Belts

High waisted pants are a revival trend many women would like to see stay in style. The art of tucking in a shirt is a lesson I teach many clients. The most classic and professional is the full tuck, while the half and front tuck add a little street style to your look. All of these styling tricks showcase your waist and beg for a belt. If you find yourself perfecting the art of tucking, invest in a bold style with a statement buckle.

Power dressing is always in style. Sticking with these versatile trends will help you transition your work wardrobe from a more conservative winter to a colorful, comfortable, and office appropriate spring.

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China’s February factory PMI seen at lowest since 2009 as coronavirus slams production: Reuters poll

BEIJING (Reuters) – Activity in China’s vast manufacturing sector likely shrank at the fastest pace since the global financial crisis in February as the coronavirus suspended large movements of goods and people in most parts of the country.

FILE PHOTO: A worker welds a bicycle steel rim at a factory manufacturing sports equipment in Hangzhou, Zhejiang province, China September 2, 2019. China Daily via REUTERS/File Photo

China’s official manufacturing Purchasing Manager’s Index (PMI) is forecast to fall sharply to 46 – a level not seen since January 2009 – from 50 a month earlier, according to the median forecast of 25 economists polled by Reuters. The neutral 50-point mark separates monthly growth from contraction.

The gloomy readings highlight the colossal economic damage to the world’s second-largest economy from the coronavirus that has killed almost 3,000 people in mainland China and forced draconian travel restrictions and quarantine rules.

Nomura expects first-quarter growth to be at 2.0% year-on-year while Capital Economics estimates China’s economy would contract outright in year-on-year terms this quarter, for the first time since at least the 1990s.

Wary of the deepening economic costs, the country’s top leaders have urged local governments, factories and workers to re-start operations as soon as possible in less affected regions, but many officials are concerned about a resurgence of infections.

Official data showed that production levels at China’s small and medium-sized companies, a major employment sector, were just 32.8% by Wednesday, while a majority of migrant workers – including those in Hubei – are yet to resume work.

Nomura estimated that only around 30-40% of migrant workers have returned and expected the lockdown in Hubei to be extended into mid-March. Hubei has over 10 million migrant workers.

Many small factory owners have struggled with labor shortages.

“We are not able to find people. Most of the migrant workers at our factory have not returned and when they do, they have to be quarantined for two weeks,” said Zheng Siqi, who owns a metal label factory in the manufacturing city of Wenzhou.

Zheng had reopened her factory on Monday after obtaining local government approval, but production is just a quarter of its pre-suspension level.

Analysts say Beijing is aware of these pressures after rolling out a series of measures to support the economy. The central bank has said it would ensure ample liquidity through targeted reserve requirement ratio (RRR) cuts for banks and significantly lower funding costs for businesses.

“The leadership appears to be readying significant stimulus which should restore employment and output by the third quarter, but the hit to output during the first half of the year will still result in much slower annual growth,” said economists at Capital Economics.

President Xi Jinping has repeatedly reassured world leaders that the economic impact from the virus is temporary and that Beijing expects to hit growth targets for the year.

The private-sector Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) due on Monday – which analysts say focuses more on smaller export-driven firms – is also expected to show a similar contraction at 45.7, compared with an expansionary 51.1 in January.

The official PMI and its sister survey on the services sector will be released on Saturday.

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