Last week, Colin Haig, president of the Insolvency Practitioners Associations, told Accountancy Age the issue had become a real concern.
Although the two disciplines are accepted to be separate and require a different skill set, many insolvency practitioners practice both types of work. But some experts believe blurring the issue is detrimental and the disciplines should remain separate.
A clear distinction started to be made between turnaround and insolvency five years ago when the American Turnaround Management Association attempted to set up in the UK. The TMA backed down, but it began the momentum towards two distinct professions.
Three years later, the UK formed the Society of Turnaround Professionals under the auspices of insolvency trade body R3. The STP does not allow members to work in insolvency. Instead, they help troubled businesses get back on an even keel. Last year, Stuart Rose won an award from the STP for turning around Arcadia.
Dennis Levine, chief executive of asset-based lender Burdale Finance and a sponsor of the STP, says that highlighting the difference is crucial. ‘There is a difference and people need to decide what kind of work they are doing. It is not a question of whether or not they have the skills, but they need to be clear to whoever employs them as to what their role is,’ he says.
Burndale Finance lends money to help companies turn their businesses back into profitability, and will also help a company buy an insolvent business. However, it will not lend money to insolvent businesses. ‘In a successful turnaround, nobody loses money. But in a company that is going into formal insolvency, there is no guarantee that all the creditors will get all their money,’ says Levine.
Meanwhile, many insolvency practitioners believe turnaround is part of their work. Nick Hood, partner at insolvency firm Begbies Traynor, says that most insolvency practitioners dealing with ailing businesses work in turnaround in 15% of cases.
But Hood does acknowledge turnaround work is different from insolvency.
‘Turnaround assignments depend on the state of the company. Turnaround involves a financial problem, but it is not as serious as one that would require formal rescue,’ he says. Hood concedes that the different types of work require other skills, but he believes most IPs can do both types of work.
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