Parmalat USA Turnaround

Senior managers in Parmalat SpA's U.S. subsidiary (Parmalat USA)—many of whom were from the Italian parent company or other Parmalat entities—uprooted, cleaned out their offices, and left as the magnitude of the parent company's fraud became known in late 2003. Parmalat USA had filed for bankruptcy in October 2003. With urgency and desperation, Enrico Bondi, the Extraordinary Commissioner of Parmalat SpA, had contacted the Milan office of AlixPartners, a global restructuring, consulting, and financial advisory firm. Bondi requested AlixPartners' assistance in determining the cash situation at the U.S. subsidiary and helping lead the struggling division, which was now void of senior management. Jim Mesterharm, a managing director in AlixPartners' Chicago office, was asked to lead this initiative as the chief restructuring officer. Parmalat SpA, often referred to as the Enron of Italy, was a trophy turnaround assignment at the outset for AlixPartners: for them, the worse the economic problem, the better the assignment.



Ninety days was enough time for Mesterharm and his team to determine what could be cut off and what discussions were needed with the U.S. vendors, customers, and employees. Mesterharm's team changed the accounting methods from GAAP basis to cash basis. They constructed a 13-week cash flow model. Aggressive efforts were made to delay payables and to accelerate receivables to create cash. The battle to keep Parmalat USA afloat had begun.



The learning objective of the case is to:

1. Understand the circumstances leading to a catastrophic business failure and the required steps toward turnaround;
2. Learn how to manage multiple constituents through a dramatic turnaround situation;
3. Experience the role of a consultant in the turnaround process of a large company;
4. Expose students to international issues in management of turnarounds.