No doubt, American Businesses have seen one of the worst economic maelstroms in over 50 years.  It was around this time in 2008 that we offered thoughts on a down economy: that businesses would have to be very agile, open to innovation and seek alternative opportunities to stay ahead of an increasingly corrosive economy.  I wrote that “despite a climate that is financially questionable relative to recent years, the capitalist nature of the country offers opportunities for businesses to thrive – even in anxious times.”

Those “anxious times” have not yet dissipated for many businesses.  Indeed, the worst for some economic and geographic sectors certainly is not over. The stock market’s increasing capitalized values sends mixed messages to many, especially to the non-registrant companies who are constricted by tightened credit standards.

Given the ubiquitous nature of this economic recession, many companies have re-engineered themselves to align with what still is an unpredictable economic environment, although we seem to be in the nascent stages of the recovery.  While re-engineering is a complex process that is unique to every enterprise, in its simplest form it can be boiled down to four critical questions in the face of contraction:

- Is the business model appropriate to the cost and efficacy of resources and competitive alternatives?
- Is the value proposition to the customer still valid?
- Are we visible enough to a broad enough market?
- And, perhaps most importantly, are the traditional buyers still buying at this time?

Even among those that adapted, there are companies that found the shift in buying behavior so radical it meant a total change in business model.  They have been required to change their targets, products or terms of customer interconnectivity to create less risk and more value to customers, a practice that takes a high level of flexibility and innovation.

For those in the capital formation markets, the M&A world serves as one of many strong examples of how this repositioning can lend strength.  As we all know, private equity activity as we used to know it has dropped off precipitously, with about 50 percent less activity than in recent years.  That has left an opening, however, for strategic buyers to capitalize by making investments and collaborative partnerships at a time when the markets are in transition and values are down.  This CFO Magazine article on strategic acquisitions tells a compelling story, noting that “in 2009, strategic buyers have closed a whopping 94% of total announced mergers and acquisitions. With private-equity buyers still largely on hold, 2010 looks to be another year without much competition for CFOs looking to buy.”

Additionally, there is fascinating strategy being played out across a variety of industries.  Simply scanning the pages of TheDeal.com paints a picture of an incredibly active market — players are timing moves that will bring us new leaders when the financial mood lifts.  Opportunities abound in industries that are re-inventing to suit a new marketplace, with notable activity in the healthcare, energy, and communications sectors. Recessions of this magnitude will certainly produce widespread changes in who will prosper and who will not, and the differences will be pronounced and long-term.

In our consultative work with clients we see both sides.  Some are examining their options and looking for a conservative pathway to avoid additional economic erosion, while others are making plans to strategically and tactically adjust to meet their long-term growth objectives.  Both are valid approaches, but the most competitively advantageous and dominant strategy is (and should be) a willingness to stay true to a long term vision, act with dexterity and have your entire organization be culturally agile to capitalize on opportunities presented in this changing economic landscape.

As we close out the calendar year, we know that 2010 will bring a new host of changes and challenges. We are eagerly watching the reshaping of the market, and in truth we ourselves are practicing our own philosophy by proactively adjusting to meet the needs of our changing society.

The FASB and IASB have been involved in a joint project on leases, with the objective of creating a common standard on lease accounting to ensure that assets and liabilities from lease contracts are properly recognized in the balance sheet. The project seeks to overhaul (in a major way) the existing lease accounting rules found within FAS 13 and IAS 17.

As far as background on the project, during March 2009, the Boards published a Discussion Paper, Leases: Preliminary Views [pdf], for public comment. The comment period for this Discussion Paper ended during July 2009. The Boards plan to publish an Exposure Draft during 2010, with implementation anticipated for 2011. So far, the boards have met six times on this standard…and have only recently begun to even discuss how lessors would be impacted under this new paradigm…

So why the big uproar about this proposal? It would likely place hundreds of billions of dollars in assets and obligations onto companies’ balance sheets, that’s what.

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I shared - and gained - valuable insight participating in a panel entitled “What keeps you up at night?  Solving strategic financing challenges for today’s lean manufacturers“ for the Greater Boston Manufacturing Partnership last week.  Our panel discussion was focused on partnerships, mergers and acquisitions, and joint ventures, and it was interesting to see the parallels between evolving strategies for growth and the manufacturing drive for continuous improvement.

From a manufacturing perspective, specific management and execution models like Lean and Six Sigma become critical to not just propping up a company, but providing a process that yields ongoing benefits and maximizes shareholder exit value. Proactive work on the accounting and financial controls side, meanwhile, calls for a similar commitment to process and can similarly add value to an organization’s exit price.

A couple of key themes that arose during the panel included the significance of having transparent and current financials, and the necessary attention required for to problem-solving that truly gets to the root of the issue (in particular, the need to ask “why?” five times).

I appreciate the opportunity from the GBMP and look forward to contributing more in the future!