Thought Leadership Gallery
SEC/Corporate Finance
Although the financial markets may be bruised, publicly traded companies are working around the clock to solidify their top and bottom lines, finding new ways to stay healthy and move their businesses forward.
We asked members of the Moss Adams SEC/Corporate Finance Group to assess where those companies are today, where they’re headed, and how they’re going to get there, given the unique challenges—and opportunities—of our current economy.
- A Disciplined Focus on Strategic Objectives
- Financial Institutions’ Perspective
- Maintaining Core Competencies
- A Look at Headcount
Andrew Cates
Partner
SEC/Corporate Finance
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
Even during the crisis, clients continue to focus on strategies that will move their businesses forward in the long term. While strong cash management has been elevated in importance, close behind it is an active focus on gaining market share and seeking strategic acquisitions that can strengthen the balance sheet in coming years. There’s a tempered optimism among clients that have survived what seems to be the worst of the recession and are positioned well for their industry. Many discussions with clients focus on how to build, not where to cut. That’s a difference from a year ago.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
Disciplined focus on strategic objectives seems to be the overriding lesson being applied. There are many ways to become distracted during a crisis, and those leaders who have proved themselves successful in seeing business cycles through in the past have been able to look to the future and focus on what’s critical or necessary as opposed to what’s desirable. Many corporate leaders describe a greater involvement in the day-to-day execution of their strategies, but that involvement seems to be temporary and helps others in their organization gain a better understanding of what’s truly critical to the business.
Recessions and downturns often lead to innovation and new opportunities—how are you seeing that in the industries you serve?
For technology companies, the challenge to advance innovation and opportunities to the point where investors recognize and accept the value proposition is always at the forefront. This recession hasn’t changed that, but what has been remarkable is the drive to outdistance competitors. The difficulties every industry has faced with the financial crisis and overall downturn in consumer spending has created a greater distance between healthy companies and their competition. Those companies able to execute on their core technologies or strategies are poised to capture greater investment and market share when the economy turns around.
John Hancock
Partner
Financial Institutions
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
Most financial institutions are looking inward to assure they have adequate capital and liquidity plans, strategies to enhance operating efficiencies, and processes to resolve impaired assets. Until they resolve or stabilize these very critical considerations, most financial institutions will be cautious about pursuing growth opportunities or implementing strategies to expand their business.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
Many leaders of financial institutions have never before experienced the kinds of difficulties and challenges the banking industry is now confronting. They enjoyed years of growth and prosperity mingled with periods of mild economic downturns and limited loan losses. Some of them dismissed the severity of the current situation—or the impact it would have—and these institutions will experience a slow recovery. In some cases their survival itself may be in question. On the other hand, those leaders that have experienced a severe economic cycle before reacted swiftly this time. They recognized the problems, analyzed the potential impact on their institutions, and established a focused plan for meeting the challenges.
Recessions and downturns often lead to innovation and new opportunities—how are you seeing that in the industries you serve?
When the economic downturn began, many banks recognized a vulnerability they had created. This was mostly in loan concentrations to certain sectors and a funding reliance on certain deposit products. As a result, credit risk became pronounced when the housing market declined, and funding vulnerabilities became evident when more easily obtained brokered deposits fell out of favor with regulators. Recognition of these vulnerabilities will cause banks to refocus on commercial and industrial loans as well as on their core deposit base of checking and savings products. This will enhance competition among banks but move their operations back into more traditional territory.
Curtis Matthews
Managing Partner
Business Risk Management and Control Solutions
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
Everyone’s focused on increasing revenues and cutting costs; it’s really that simple. They’re maintaining core competencies, but they’re shifting business focus to areas where there are real customers for their services. One good example is federal contracts; there’s strong activity there right now. Overall, failing companies are not improving processes and efficiencies—that’s the real takeaway here.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
It doesn’t appear as if many companies are learning much of anything now, other than how to survive while spending less money. They’re learning about new markets, areas in which they can move forward. There are a good number of nimble players seeking, and accessing, fresh revenue sources, which is encouraging.
Recessions and downturns often lead to innovation and new opportunities—how are you seeing that in the industries you serve?
There are lots of opportunities to leverage company skills in new markets and in new ways today. Health care organizations, for example, are trying to find ways to generate cost savings and new revenues; technology and life sciences companies are trying to tap previously underused royalty streams. Companies are also looking at regulatory requirements, which are increasing, in a new light. If you’re resourceful and determined, there are solid avenues forward.
Mark Weber
Partner
SEC/Corporate Finance
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
Clients are taking a hard look at their payrolls and personnel count. It was easy to justify adding to the headcount to grow the business, assuming the overall economy would push up the demand for products and services. Clients are also staying on top of their accounts receivable more than ever. There’s an increased focus on ensuring that someone is monitoring customer accounts, looking at historical payment trends and variances from those trends. Clients seem to be less tolerant of allowing customers to stretch out payment terms.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
On the matter of headcount, clients don’t seem to be eager to begin adding personnel. Most appear to believe they’ve cut personnel sufficiently to address current demand, and they’ve actually experienced increased productivity from their workforce.
As it relates to the credit crunch, it appears that business leaders have a different perspective on their relationships with their banks. Most are concerned about renewing credit facilities. Clients have begun to look to alternative sources of financing. They also understand that the whole borrowing dynamic has changed. For the most part, they’re looking to reduce their exposure to leverage. Although all capital markets are tight, small public companies seem to be looking at equity capital, rather than debt capital, as a first option.
Recessions and downturns often lead to innovation and new opportunities—how are you seeing that in the industries you serve?
In the case of manufacturers, they’re focused on controlling their inventory levels. In addition, some clients who have put off upgrading inventory IT systems recognize that this isn’t prudent. These upgrades will likely lead to better information and increased profitability in the future.
Clients are also looking at ways to communicate their value proposition to their customers and prospective customers. Communicating how their product or service can result in cost savings for their customers is really important. This has led to changes in the existing products or services suite so the focus is more on providing cost savings. And some clients have opened up their products or services to new customer groups—even though this can have risk attached to it if the customer focus moves too far away from the core business.
SEC/Corporate Finance Contacts
Andrew Cates
206-302-6372
John Hancock
503-323-7386
Curtis Matthews
503-704-6943
Mark Weber
480-366-8312
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For more insight and clarity about the current business climate, see our other Thought Leadership Galleries.