Jacques H. “Jac” Belét III, CTP, is president of The Belét Group Inc., based in Memphis, Tennessee, with staffing throughout the United States. He has done turnarounds and corporate restructurings of middle market companies for 35 years and has an in-depth background in creditor and debtor representation in both bankruptcy and out-of- court restructurings. Belét has served as interim chairman, CEO, COO, CFO, CRO, and financial advisor for companies across a host of industries. He provides financial advisory services to creditors and lenders facing severely distressed credits and plays a significant role in financial and balance sheet restructuring as well as buying and selling companies with untapped value.
Belét is a former member of the TMA Global Executive Board (then known as the Executive Committee) and the TMA Tennessee Chapter Board of Directors. He is also a director of the Bolivar, Tennessee, Downtown Development Corporation; chair of the Bolivar Revenue Finance Corporation and the Joint Bolivar/Hardeman County Strategic Planning Committee; a former director of Hardeman County’s Boys and Girls Club (of Greater Memphis); and a founder and co-chair of the Hatchie River Conservancy, dedicated to preservation of the Hatchie River, which the Nature Conservancy called “one of the 75 last great places on Earth deserving of preservation.”
Q: How did you get into turnaround and restructuring work? You were there pretty much right from the beginning, weren’t you?
Belet: I was. I grew up in the Fortune 500 turning around orphaned divisions. I started as an industrial engineer on the shop floor, and my role was to set manufacturing standards and find better ways to do things. I was always a risk-taker and in Fortune 500 situations, employees with longevity take the safe route. As a result, they’re not risk-takers. When a dilemma came up that required some bold decisions and trying some crazy things, management would turn to Belét because they wouldn’t have to take the fall if it didn’t work.
I grew up in the rubber industry in Akron, Ohio, and then in Arkansas and Los Angeles. I worked for B.F. Goodrich for eight years and for American Hard Rubber before that. We were getting Goodrich out of the tire business and moving it into new technology. It was a total transformation of the business and a drastic change in its business model. I was initially on a 50-man team charged with value analyzing every business that Goodrich was in. Today, Goodrich is part of United Technologies, and its core competencies reside in aerospace.
Q: When did you start your own business?
Belet: In 1983 I formed The Belét Group after doing a turnaround for Cities Service Oil. I decided I could do things better by putting a team together and doing restructurings from a professional level as opposed to an employee level.
Q: What have been some of your favorite or most gratifying engagements?
Belet: Probably one of the most notable and interesting was Litton Microwave, which I oversaw for seven years. That company was a leading innovator in the microwave oven industry. Interestingly, this was an offshoot of its radar systems. The industry was created by both Litton Industries, which was a high-tech military contractor, and Amana, which was owned by Raytheon, another high-tech military contractor.
Litton and Raytheon built the microwave oven industry from the ground up. It came about by accident. An engineer had a Hershey Bar in his pocket while he was working on a device that converted electricity into microwave energy. Microwaves are the core of radar systems. He misfired a device, which melted his Hershey bar instantly. He went home and developed the world’s first microwave oven in his garage. That was back in the late 1950s, and I remember going to see it as a little kid because it was a “magical” device.
By the late ‘60s, Litton Industries had really pioneered it and built not only the commercial sector but also the consumer microwave oven sector. They were a dominant player. Harvard Business Review praised Litton Microwave for its pioneering and stellar management techniques. Ten years later, the Koreans and the Japanese had penetrated the market, and they just torpedoed it. Litton was left with a $500 machine in a $100 market.
Litton Industries wanted to divest of that business because it had become a commodity, so it was an orphaned division. They were focused on driving their military technology and commercial products groups into new fields. After numerous attempts, they sold the company to a holding group, and the deal blew up right out of the chute—payroll bounced and so forth—so it was put into a Chapter 11. The Belét Group was asked to step in as debtor in possession and take operating control of the company, which we did.
We worked that through the bankruptcy process for more than 2½ years. It was a massive downsizing and total transformation of the company. The question was, do we liquidate, or do we transform this company and rebirth it, and we chose to transform and rebirth it. We emerged from Chapter 11
as a viable company and sold the assets back to Litton Industries.
The Belét Group was asked by Litton Industries to continue to rebuild the company and either buy it or find a home for it. We moved into the international sector and focused strictly on commercial microwave ovens, where the high margins were. We restructured three small international operations in Canada, the U.K., and Australia into Euro-Africa, Asia-Pacific, and the Americas. We leveraged our proprietary technology and quickly moved into 35 countries and over the course of two years became the dominant player.
We focused on our two primary assets, our proprietary technology and our innovative reputation, transforming the company into something completely different. We created the JetWave, a device that could cook a frozen rack of lamb to perfection in 6¼ minutes, but that’s a whole other story.
At the end of a two-year period, we sold the company to Raytheon’s Amana division. Amana had no international presence, and we were the dominant player globally, so it was a perfect fit for them. The disappointing news is that Amana couldn’t have cared less about the technology and only wanted the international market share. I then oversaw the transition of the company for both Litton and Amana for an additional two years. In retrospect, maybe I should have bought it. It would have been fun and perhaps resulted in a different outcome.
Q: That was a long haul.
Belet: It was really about focusing on the business model and transforming the company, which related back to B.F. Goodrich, where we were transforming a rubber company into an aerospace company.
Q: That takes a lot of imagination.
Belet: What was so gratifying was disarming an adversarial situation between management and the employees and creating a synergistic, high-energy team. Then it was a matter of rediscovering the chief core competencies of the company and moving from there to where the world was moving and trying to apply those assets so that we could leverage it into something brand-new. It really took the skills and knowledge of all the employees to transform the company.
Q: When did you get involved with TMA?
Belet: I got involved around 1990. TMA was fledgling organization that was undercapitalized. It was a “pass the hat to cover the overhead” situation at the time. It had no permanent leadership.
Q: What made you stick with an organization that wasn’t all that well organized at the time?
Belet: It was a turnaround of the Turnaround Management Association. Back in that period, anyone could call themselves a turnaround practitioner, and it was not very methodical. So it was a coming together of ideas and people who saved companies. And the problem with any fledgling entity is that you need to hone the business model and solve some core dilemmas. You need to reach out to all the stakeholders and offer something of true value to each. And you need to have a well thought out way to capitalize it.
I was asked to participate on a panel at the Annual Conference in 1991 or 1992. We made it fun and interactive, and as a result of the success of that panel, I was asked by the board to chair the following year’s Annual Conference in Washington, D.C. That’s when I learned that the organization had some real issues. I played shuttle diplomacy between a number of chapters, recruited support along the way, and organized the Annual Conference. There was a book at the time that was very popular, In Search of Excellence, by Robert H. Waterman and Tom Peters. I got Bob Waterman to be the keynote speaker at the conference. We built a lot of fun and recognition into the conference. It was a success, and cash flowed. As a result, I was asked to sit on the board.
From there, we focused on where TMA was going. The real dilemma was a polarization. Some wanted the organization to be a small, tightly knit organization of turnaround practitioners only. Others wanted it to be inclusive and to grow by bringing in all of the stakeholders—the capital providers, both debt and equity; the legal community, both bankruptcy and transactional; the accounting community; the investment banking community; and all the peripheral players—valuation folks, auctioneers, liquidators, and so forth. We resolved to take the inclusive route and to build a small team of people, the Executive Committee, willing to commit to executing the expansion plan.
We focused then on capitalizing the organization and putting a leadership team together and moving it from Washington, D.C., to Chicago. We got major players involved—Arthur Andersen, Ernst & Young, the major law firms, and the major lenders. Arthur Andersen and EY provided a lot of horsepower, and we began working on how to capitalize it, how to pull conferences together, how to make the thing work, and how to reach out. We created The Journal of Corporate Renewal. It was a newsletter then and had been published once in a while, but we started putting it out bimonthly with absolute regularity. We began building the infrastructure in Chicago and properly capitalizing the organization.
Q: It really took off after that.
Belet: It did. I stayed on the board for six years, and the goal was to have $1 million of cash in the bank, create a certification program, and have a $1 million set aside to fund education and certification. We accomplished those goals by the end of my six years on the board, and we had 2,000 members at that point, as I recall. When I started, we were 350 members. By the time I retired from the board, we were growing on an international basis, too.
Q: Things have changed over the past few years. Have we just hit a different point in the life cycle of the organization? How do you read the situation?
Belet: I think the beginnings of contraction probably relate to the global economic meltdown. The dynamics changed tremendously, so the work load and the opportunities changed. It’s the same as any entity, whether it be a company, a product, or a trade organization. Things change, and you have to change with the times. To me, that’s what’s been occurring, and TMA has just been sorting itself out and reacting to global change and dynamics.
Q: You’ve been a TMA member for 28 years. I assume that means you find it useful.
Belet: TMA is a great networking organization. It allows you the opportunity to connect with other players, some doing the same thing that you’re doing, with some doing it maybe in different ways, and others that complement what you’re doing. It’s also an educational organization. It teaches and creates opportunities to learn different skill sets, to better organize, and to play a better game.
Q: What advice do you have for someone who is new to the industry or is thinking about getting into it?
Belet: I would ask them to really search their soul as to why they want to enter the turnaround field and seriously come to grips with that. If the contribution they want to make is to change companies, then the question is how? If someone is really looking to play a long-term role, which my company tends to do in turnaround situations, you have to do it differently.
Professional fees are expensive. The turnaround industry provides great value, but its clients are faced with cash flow constraints. Expensive professionals can’t stay in deals long enough to have a total impact. They come in and move quickly to right-size organizations, address the balance sheet, find a new home for the business, and move on. My company tends to focus on the long game, which is to really transform a company. That requires capital and patience. The fee structures that other turnaround firms charge just can’t be borne by a company in transformation unless you bring the capital to the game.
So the question is, what role do you want to play in the turnaround process? If you’re seeking fees, then you need to align with a major organization that can support those fees and move you from project to project. If, on the other hand, you’re focused on transformation, you’d better be well capitalized because it’s expensive to search out the right deal, and you need to put money in some of the organizations that you’re turning around.
Q: If you could start your own career over, would you do anything differently?
Belet: I would have learned the private equity game a lot earlier. Knowing how to turn around a company is one thing. Actually having the ability to successfully see a turnaround all the way through is altogether something else. It requires that equity fully embrace the model and the plan to achieve it, and have the appetite and wherewithal to see it through.
When my team looks at a potential turnaround that fits us, the very first questions we ask are brutal: Why does this company deserve to exist? What are its unique core competencies? What does it offer that no one else can? Can it lead within its niche? What’s the business model, and how does that fit into today’s world? Companies go through a life cycle just as humans do, and often companies and their employees relate too heavily to their products. All products die, and if you rely on them too heavily and the products die, you will die.
Wayne Gretzky said it best: “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” It’s no different in a turnaround. No amount of cash can fix a poor business model or a company that has no uniqueness and lacks the ability to lead in its niche.
While all stakeholders in a deal must derive adequate value to support a turnaround, equity is the key!
Q: Is it harder now to turn around a company than it was when you started, or is it just different?
Belet: Both. It’s easier in the sense that we have tools that we didn’t have back then. We have formalized processes now that we didn’t have back then. It’s a lot easier in that regard.
With respect to the difficulty, the economic meltdown blew out most of the companies that didn’t deserve to continue to exist. Those that were teetering were purchased by strategic players who could fold them in and leverage them in their portfolios. So it’s harder in the sense that the opportunities out there are different and limited. The world has changed. It’s become more perfected, if you will. Interest rates are very low, and there is pent-up capital searching among too few deals. When interest rates flip, the pendulum will swing back the other way.
Q: When you’re out of the office, what are you passionate about?
Belet: A number of things. I enjoy horses of different types. I enjoy Quarter Horses, which were used in the old Wild West, and I enjoy performance horses, particularly the American Saddlebred breed.
Q: Do you still own horses?
Belet: At the moment I don’t. I had 16 at one point. Anyone who’s been around horses will tell you, you can’t make money in the horse industry. It’s strictly for pleasure. Service providers may earn some money, but unless you’re a racehorse owner or a trainer like Bob Baffert with a horse like Justify, who just won the Triple Crown, you’re not going to make any money. But it’s a very interesting and fun field.
Q: How did you get involved with horses?
Belet: I grew up around horses and always enjoyed them. They’re majestic creatures. The challenge with horses for me is that they can’t speak, so you’re always trying to figure out what this horse is trying to say to you. What are its problems? What are its desires? What are its aptitudes? It’s not unlike a turnaround.
They used to use the term “breaking a horse,” which related to subjugating the horse. In other words, you force the horse into submission, and you basically strip it of its free will. That doesn’t work, and it doesn’t work with employees in a corporation or in trying to work with other people either. So the question is, how do you communicate with a horse?
You have to learn other ways of understanding a horse, and that gets into gelling with a horse, getting on the same wavelength and working with the horse to gain its respect and to understand its strengths and weaknesses and what its problems or needs are, physically and mentally. That’s what’s most enjoyable—to take a horse and transform it into something that’s beautiful and majestic and an animal that can excel in its discipline. It’s a deep learning exercise.
Owning horses is mostly writing checks. The question is, do you buy this horse? Is this the right horse, or do you breed these two horses together to generate the right horse? If you do that, do you sell the foal right away? Do you hold on to it and invest in training? Then there’s the issue of becoming too attached to the horse.
You need people to take care of the horse. Horses require medical attention. They require food and water—massive amounts of them. They require a roof over their head, maintenance, and a huge backyard to play and graze in. Then they need a new pair of Italian shoes every six weeks, and those have to be custom-made.
So that’s what owning a horse is all about—figuring out whether to buy this one, get rid of that one, keep this one on the payroll, and then, what’s wrong with it? What’s inhibiting it from progressing to the next level? What are the different strategies to get there? Part of training the horse is working with the trainer to resolve issues so that it can perform well and live a wonderful life.
Q: You may not own any horses at the moment, but it sounds like you remain in the game.
Belet: How can you not? I grubstaked a trainer in Minnesota, and he’s done very, very well for himself. I participate with him and get involved when it makes sense, but I don’t write blank checks for horses and play it at that level any more.
Q: What would people who only know you professionally be most surprised to learn about you?
Belet: Two things. I flew an OV-1 Mohawk in the Vietnam War during a three-year stint in the Army. I flew right seat as a T.O. (technical observer). My mission was in Laos, primarily, and North Vietnam. The OV-1 Mohawk was a twin-engine, fixed-wing turboprop. It was a light attack reconnaissance plane armed with 19 2.75-inch rockets. I’m torn about the thing. I love the plane, but I’m haunted by the damage we did. Laos is the most bombed country in the world, and the effects are still being felt—mostly by kids. I remain very active in our Mohawk Association, getting together with the people I served with and younger generations that followed. It’s a tight group!
Secondly, I spend a huge amount of my time on pro bono work. A small group of us got together a decade ago and committed to turning around, restoring, and reinvigorating a small rural Southern town and its surrounding county, both of which had long ago been left behind. But they’re steeped with a unique and rich history. Included in this endeavor is the preservation of a 168-mile-long river, the last unchannelized tributary to the Mississippi River. Next month we’re reopening a completely restored historic one-screen movie theater.
Photos © 2018 Phillip Parker, phillipparker.com