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Strategy and restructuring

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Latest posts by Daniel Bruell­mann (see all)

Ser­i­ous mis­takes made while busi­nesses are still prof­it­able may cause restruc­tur­ing needs.

Prof­it­ab­il­ity improve­ment, turn­around or even liquid­a­tion, need a viable concept with a coher­ent strategy and detailed meas­ures address­ing stra­tegic­al, struc­tur­al, oper­a­tion­al and fin­an­cial issues and solu­tions to be imple­men­ted as soon as pos­sible with sup­port of stakeholders.

Dis­tress can be caused by fail­ing to secure fin­an­cing which can be main­tained in the long-term. Excess­ive indebted­ness can be a res­ult of using unreal­ist­ic fin­an­cial pro­jec­tions or delay­ing optim­iz­a­tion of work­ing cap­it­al and not neces­sary assets.

Com­pan­ies which, for whatever reas­on, lose their prof­it­ab­il­ity are often in the dif­fi­cult situ­ation of not being able to imple­ment new pro­jects and even slide into insolv­ency. Latest at that point, Investors goals will look very dif­fer­ent than borrowers.

Fin­an­cial con­straints  or evid­ent insolv­ency risk require quick action. Liquid­ity and fin­an­cing must be secured and man­aged, prof­it­ab­il­ity improved and value conserved.

How­ever, viable turn­around con­cepts are only viable with a coher­ent strategy and adequate meas­ures address­ing crisis situ­ations and con­vin­cing stake­hold­ers that it can be imple­men­ted successfully.

An extern­al team com­ple­ment­ing busi­ness, restruc­tur­ing, leg­al and audit­ing skills and qual­i­fic­a­tions can effi­ciently add resources for an unbiased ana­lys­is of the situ­ation and the imple­ment­a­tion of urgent meas­ures. It can also help find­ing con­ver­gent solu­tions accept­able to the parties even fol­low­ing unpro­duct­ive negotiations.

How we can help

Among first meas­ures, we can put  in place a Turn­around Dash­board col­lect­ing most rel­ev­ant inform­a­tion to sep­ar­ate value cre­ation from destruc­tion. Then a restruc­tur­ing plan pri­or­it­izes first meas­ures to optim­ize solvency with the help of a liquid­ity con­tin­gency plan until secur­ing longer term financing.

Those who know and will lead the busi­ness in the future should be part in the defin­i­tion and hence imple­ment stra­tegic and oper­at­ing meas­ures for prof­it­ab­il­ity improve­ment. How­ever, man­age­ment is usu­ally absorbed in fight­ing symp­toms. In such a situ­ation, it is often use­ful to involve extern­al spe­cial­ists to take urgent fin­an­cial meas­ures. They thus might bet­ter demon­strate to the investors the eli­gib­il­ity for fin­an­cing of indi­vidu­al busi­nesses and projects.

A third party may also be use­ful to medi­ate between the bor­row­er and lender con­ver­gent solu­tions accept­able to both parties when nego­ti­ations are get­ting nowhere, or to arrange adequate altern­at­ive refin­an­cing through dif­fer­ent meas­ures and instruments.

Debt morator­i­um or refin­an­cing with debt can­cel­la­tion can make sense also for cred­it­ors in the con­text of a restruc­tur­ing and recap­it­al­iz­a­tion. But a fin­an­cial restruc­tur­ing can hardly last without remov­al of the stra­tegic, oper­a­tion­al or per­son­al causes of distress.