A Firm for Troubled Times
Firm: Crossroads LLC, Irvine, CA
• Founded: 1997
• Specialty: Restoring value to troubled and underperforming companies
• No. of consultants: 80
• No. of employees: 100
Bankruptcy filings by American consumers and businesses are at an all-time high. By the third quarter of 2001, filings were already 3.5 percent higher than the comparable 1998 period, according to the administrative office of the U.S. court system. The all-time mark for bankruptcies was 1.44 million set in 1998.
When companies fall on hard times and must quickly decide whether to liquidate, sell, or restructure, they call in consulting services like Crossroads LLC. Founded in 1997, Crossroads has quickly risen to the A-list of firms specializing in corporate restructuring, corporate finance, turnaround management, and operations improvement. The firm has doubled personnel and revenues each year since its inception, and today has 100 employees and revenues of about $40 million.
"Here's a firm that's come out of nowhere. They've established themselves. That's a phenomenal accomplishment," says Ford Harding, a consultant to consultants.
Crossroads' consultants primarily come from banking and accounting backgrounds, as well as executive positions in various vertical industries. These consultants are usually brought into a troubled company by banks, investors, or board members to quickly assess how to return value to the business. In 40 percent of its cases, Crossroads consultants step in and run a company while its value can be improved before selling or restructuring. Another 40 percent of the time, consultants stay as advisors to the turnaround.
Principal Ruth Ford, though, sees a disturbing trend — specifically with troubled dot-coms and telecom companies. "Some of the industries that are really distressed don't have hard assets or sufficient smaller assets," Ford explains. "You have revenues that aren't even as big as the amount of debt, and assets, if they exist, are very specific to the business. Lots of times they come with built-in technology obsolescence, and therefore have very little liquidation value or value to other people."
When companies like these have no chance for survival, they're increasingly turning to liquidation, which reduces the need for advisors such as Crossroads. "We're finding that the business opportunity is to actually be liquidating the company," Ford adds, so Crossroads has begun working on liquidation cases and is currently liquidating the assets of defunct on-line toy store e-Toys.
Looking ahead, Crossroads, as a newcomer, wants to take market share from its competitors, like Jay Alix & Associates and Prolman Associates, by touting its specialized staff with an average of 20 years' experience. The firm also is fine-tuning its operation improvement business, litigation practice, and corporate finance practices, and expects them to grow exponentially in the next two years.
Ford hopes that its litigation practice can even grab a piece of Enron work down the road. "If you can think of any possible litigation matter brought up in the press, each one of those claims has to be pursued," Ford says. Right now, her firm is too small for such huge projects, but "once all the big players are eaten up, there are also a lot of conflicts — and those are the opportunities we get to play in."
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