Restructuring A Company – Some Basic Options
Restructuring A Company
Restructuring a company is usually only considered when all “business as usual” options have been tried and have failed.
It is generally only then that operational executives and owners believe that the business cannot continue in its present form and start exploring viable alternatives.
All of the options shown below are typically considered as part of the process of exploring the various options available to restructure a company’s finances and business operations.
Those who own and manage the firm then pick the best available alternative and often hire experienced executives, like Revitalization Partners, to manage the process of implementing the restructuring a company method they select.
Executives who have never had to manage restructuring a company before are most often not familiar with the myriad of business restructuring options available to them and are also typically not familiar with the actual process of implementing such restructuring methods.
Our Primary Objective
Restructuring a company is intended to enhance the overall value of the business and thus make the firm or surviving assets more financially attractive to creditors, investors and the primary capital markets. This restructuring “process” is thus intended to streamline the company in order to enhance operational efficiency and profitability or make the assets as financially attractive as possible to facilitate a sale.
Our Primary Function
We can help with restructuring a company in the following ways:
- Corporate Realignment: restructuring a company through this process we analyze the entire business and develop a plan that would reorganize the firm’s operating units into the most profitable and efficient business structure. This can include the transfer of businesses units or company assets from one group to another or the sale of identified business units. It often results in the release of capital that has been previously locked in the balance sheets of these business units.
- Liquidation: : Many times, the liquidation option is rejected by management because it is initially seen as a public acknowledgment of business failure. The fact is that some businesses have reached the end of their life cycle or the market has changed so dramatically that continuing the business in its present form is unrealistic. In such cases, a liquidation makes the most sense so restructuring a company is not a viable option.
- Managed Exits: We can assist by providing interim management to wind down the business with the goal of restructuring a company by maximizing the overall return to investors, owners and creditors while minimizing associated risks to customers and employees.
- De-mergers: Should you need to structure a de-merger, we can make arrangements such that the emerging entities will result in a financial structure that is tax efficient and creates an effective path for separation of the business units involved.
- Debt For Equity Swaps: Restructuring a company through a debt-for-equity swap involve one or more of your creditors agreeing to cancel some or all of your debt in exchange for equity in your business. This i a valuable option when you want to reduce the businesses debt load but don’t have the cash available to pay down debt or need to better use that cash for business expansion. Our experienced business restructuring team can assist with planning and implementing the most effective debt-for-equity swap option.
- Assignment For The Benefit Of Creditors: This is an alternative to Chapter 7 (or a liquidating Chapter 11 bankruptcy) that is growing in popularity and becoming an viable reorganization tool in Washington and other states. Essentially, restructuring a company through ABC is a method that enables a business to end its obligations to its creditors and also avoid the time, costs and and stigma that often occurs in a bankruptcy proceeding.
These are a few of the many techniques for restructuring a company we have used to help client firms return to profitability of professionally wind down operations. We are ready to help you.
Restructuring a company is what we do so please CONTACT US and we would be happy to confidentially discuss your situation.
Restructuring A Company
Turnaround Consulting – Six Critical Steps From An Owner’s Perspective
Turnaround Consulting
Turnaround Consulting – Step 1 – Recognize the Problem for What it Really Is – A MAJOR CRISIS
The undeniable temptation of the business owner seems to be conveniently blaming one major event for the company’s problems: Perhaps it’s just another low point in the regular cycle. Perhaps it’s just one bad management decision on extending credit or investing heavily in a new product that failed. Perhaps it’s just a couple of new orders that cost you more money than anticipated.
But your business advisors (lawyers, accountants, etc.) have got to help you accept the fact that your business is, in fact, in a Life Threatening Major Crisis, and the sooner you accept and acknowledge that you are in a crisis, the sooner you can take appropriate steps to deal with it. through Turnaround Consulting.
Turnaround Consulting – Step 2 – Recognize the Need for Outside Help.
The problems you have dictate the type of Turnaround Consulting help you should seek. If you are in a true crisis or near one, you are likely faced with dwindling cash, little time to act, and decreasing options still available to you. It is critical to seek help through Turnaround Consulting professionals who have been there and done that.
Most owners have never even heard of turnaround consulting, let alone witnessed a Turnaround Consulting specialist in action; therefore, the concept of real economic value they can provide seems vague and abstract.
The cost of Turnaround Consulting or team is usually a huge shock to the entrepreneur.
Having one or more full-time Turnaround Consulting professionals on the expense ledger, charging several hundred dollars an hour for several months, can be very expensive. Although, frankly speaking, what does it matter? Your alternative is almost certainly losing your company, your investment, your career and your status.
Turnaround Consulting –Step 3 – Selecting the Right Firm.
Most entrepreneurs operating a business in crisis are afraid of failure. This fear often paralyzes the decision-making process of the company; however, the open-minded owner looking to escape the crisis and save the company must act quickly and forcefully. The best way to do this is to bring in an objective turnaround consulting firm.
Many owners make the FATAL decision of thinking they can fix the company themselves (usually with the existing management team).
It’s generally fatal because if they had the skills and experience necessary to fix the company, wouldn’t they have already done it? When choosing the Turnaround Consulting Professional …. chemistry, personality and style of the day-to-day project management are most important.
In essence, you have to believe that you can really trust your Turnaround Consulting Professional and that other stakeholders will, as well. Although the Turnaround Consulting Professional must “fit in” with you and your company’s culture, it is also critical that the Turnaround Consulting Professional is a hands-on, goal-driven type. Unfortunately, my company had a less-than-satisfactory false start with a report-writing, accounting-type consulting firm. Fortunately, we found the right person and firm on the next go-round.
Turnaround Consulting –Step 4 – Announcing the Decision.
Our Turnaround Consulting Professional emphasized the immediate necessity of communicating with our various groups of stakeholders. Although this direct style of communicating the crisis was a little scary at first, it worked well. I was told that owners are always worried about directly telling stakeholders about the seriousness of the problem, but I was assured that the vendors and the employees especially were already well aware that the company was in serious trouble. The first day the real turnaround consultants started with us, I was asked to convene three meetings.
First, we met with the senior management team, second with all managers and supervisors, and finally with all employees. The agenda was essentially the same at all three meetings:
Turnaround Consulting
I explained that fundamentally we had a good company, but that events of recent years had put the company into serious financial difficulty; therefore, I had decided to hire a Turnaround Consulting Professional who had a strong track record in turnarounds, and that I had full confidence that our Turnaround Consulting Professionals would identify what we needed to change and lead us through the difficult issues of change.
Then, the project manager explained that over the next few weeks the company would be re-focused on generating more cash, reducing costs and establishing good management controls on decisions, processes and results.
The meetings helped create a sense of urgency with the employees and start the process of empowering the consultant. We initially contacted all vendors by letter announcing the selection of the turnaround consultant, using a positive spin.
We immediately had our purchasing manager call all major vendors to discuss the announcement and to offer a face-to-face meeting with our consultant. And yes, I completely turned over the checkbook to the consultant so that all emotion and politics were removed from the expenditure process. The lender went to the consultant directly and frequently.
At first, I was somewhat uncomfortable with this, especially since the lender had recommended the consultant. However, as time wore on and I trusted the consultant more, my concerns vanished.
The consultant significantly improved the timeliness and accuracy of both financial and operational information, and this communication with the lender went a long way toward improving our relationship. We did not directly communicate the consultant?s engagement with our customers, as we sold fairly expensive capital equipment.
However, we did arm our sales force and senior managers on how best to handle the inevitable customer curiosity and concern. In general, we followed the recommended approach: be factual, don?t downplay the seriousness of the problems, but focus on the viability of the business and our commitment to making the necessary changes to fix it.
Turnaround Consulting –Step 5 – Getting to Work
The turnaround consultant must be granted, and be able to, assume full authority to implement changes. That doesn’t mean the consultant has no accountability to the owner.
An experienced consultant will build a relationship with the owner by checking in daily and explaining the rationale for any major decision prior to its announcement and implementation. The owner must be willing to allow the consultant a fairly free rein to get the job done, and be willing to let go of sacred cows and even long-term employees, if necessary.
A good consultant will under-stand and appreciate the natural emotion involved in such difficult issues and be helpful but firm in working through such issues. It seems that the diagnostic phase of the engagement was done independently by our consultants. However, the operational and financial turnaround planning, and its subsequent implementation, were collaborative efforts between the owner, its managers and the consultants.
Milestones and goals were set collaboratively. Our consultants maintained high visibility throughout the engagement. They walked the plant floor and office daily talking with employees, getting input and sharing stories illustrating progress. They set up and managed cross-functional work teams to address specific issues. We set up regular meetings with employees. They had meetings with vendors or were accessible by phone all the time. I made it a point to introduce all visitors to the consultants, even customers.
Turnaround Consulting –Step 6 – Concluding the Project
Although no owner wants to hear this, a good consultant will tell the owner upfront that sometimes businesses are not viable and a quick sale or liquidation is the only realistic option. A good owner needs assurance that the consultant will help the owner and the company through whatever the outcome, and that the consultant will protect the owner’s integrity during any wind-down process.
Luckily, my business was viable. Assuming milestones are generally met and the company’s financial results and prospects are now in black ink, it’s time to return the company to regular management. In fact, good turnaround managers get anxious to leave at this point, as the crisis is the battle they like. However, it’s critical that the owner, and perhaps more importantly the turnaround manager, believes you have a capable management team in place.
Epilogue: The turnaround of my company was dramatic.
In 6 months under the leadership of our Turnaround Consulting Professional, we went from losses of nearly $2 million annually on $20 million of sales, a $2 million loan with a $750,000 over-advance and a lender who wanted out now and a host of operating maladies to a company making nearly $1 million annually, a new $2.5 million loan with nearly $500,000 of availability, and a much smoother operation.
On a personal note, I no longer had to worry about the business and the real possibility of having my personal guarantee called and potentially losing our home. Approximately a year later, my business was successfully sold for a very nice value. Although the turnaround consulting cost the company over $300,000, it was worth every cent. You really do get what you pay for.
Author: Dick Pulver has owned or managed a dozen privately held businesses. This article reflects his experience at Pulver Systems, Inc., a 50-year-old custom-equipment manufacturer for the large-volume bakery industry.
Turnaround Consulting
Article courtesy of: http://www.businessknowledgesource.com … Turnaround Consulting Professional.
Interim Executives – How To Select A Turnaround Professional
Over the last 60 years, the executive search industry has experienced shifts in structure and design and how it serves its clients.
Like any discipline, it’s not immune to the market dynamics that shape and refashion industries and business practices.
Disruptors such as LinkedIn and the Internet-of-everything have fundamentally changed the way search is done, and as such, these changes to traditional employment have reached the highest company ranks, and it has big implications for senior executives.
This change comes in the form of interim, or temporary, executives who are a new breed of in-sourced leadership. They are highly-specialized professionals employed to quickly turn businesses around or provide a shot in the arm until a long-term executive can be found.
Professional Problem Solvers …
Interim executives, according to those in the field, are professional problem solvers who “make something happen,” says Robert M. Kuhn, partner in charge of North American Operations for EIM.
“The people we see in a company are C-suite people. Very senior. People who have been chief finance officer, head of R&D, HR, legal. People who have long and deep experience. There’s no learning curve” when they take on an assignment.
Interim management firms “are not houses that deal in bodies,” Temp firms fill slots for a daily rate, while interim management firms have individuals who can respond to a client’s need “over and above the day-to-day situation. It’s driven by some type of urgency. We fix a problem, come in, put out a fire, resolve a crisis.
Specific Experience Needed …
And interim executives may have specific experience that’s not available within the company, such as turnarounds, acquisitions and expanding into international markets.
Positioning a company for new ownership is especially difficult: Most owners don’t know how to sell their company. You must make your company saleable.
While it’s an accepted practice in Europe, interim management only started to gain traction in the United States in the beginning of last decade. We have seen an increase in projects requiring interim senior executives.
Served As CEO’s, Presidents, CFO, etc.
The members of Revitalization Partners have served as CEO’s, Presidents and CFO’s as assignments for multiple venture and private equity backed companies as well as family owned businesses. We have positioned companies for and negotiated sales as well as structured refinancing for several mid-sized enterprises.
Before the economic downturn, interim executives were hired mainly in the health care, manufacturing and technology sectors, but the field has expanded as companies from other industries look for alternative hiring strategies, partly because “they are fearful to plan too far in advance.” They turn to interim executives because “at the end of the day they know they can control the outcome verses cost.”
Private Equity Deals …
Private equity deals have been essential to the growth of interim management. The interim executive is perfect for their model; especially when buying or investing in companies where rapid changes are required to begin to maximize returns.
It can be more economical in the long run to hire an interim executive because you are not paying hiring fees, benefits or severance. It isn’t cheap and you do pay a salary premium, but having interim executives can be especially helpful during tense situations such as restructurings. One of the offsets to cost is the ability of these executives to move rapidly to begin to identify and resolve problems.
An interim executive can be brought in as an intermediary who allows the financing structure to remain. We handle the tough negotiations. They engineer [the restructuring], so when they go away, some of that internal negative feeling goes with them.
An Essential Qualification …
Having the appropriate background is an essential qualification for an interim executive, but these managers often walk into a new office just as tensions are at their highest, so soft skills are critical as well.
“You’re dropped into a situation that is in transition. You should be comfortable. You have to be able to move forward, to make the tough decision.” Says an experienced interim executive.
A 2010 report from Stanford University and executive search firm Heidrick & Struggles says barely 4-in-10 companies have an immediate successor to a CEO.
And the American Management Association discovered a year later that only 14% of businesses consider themselves “well prepared” to handle a sudden loss in senior management.
With this in mind, interim execs can take some of the pressure off internal and external executive search to find the right fit and the search team can be highly strategic about filling the placement while providing internal leadership to the company as a placeholder.
Measured On Only One Thing …
True interim leadership isn’t a threat to the search process, says Robert Jordan, founder and CEO of the Association of Interim Executives. “The traditional concept of permanent employment is very different from that of an executive
Most interims stay clear of political agenda or bureaucracy because they are measured on one thing: results. They also aren’t distracted by other tasks that often come with permanent employment at any level.”
He says that interim management has been around in Europe for a generation and is not yet a household phrase here in the U.S. “But that trend is shifting here as companies begin to see they are getting the best of both worlds with temporary and expert experience that can achieve rapid and cost-effective results.
Revitalization Partners is a Northwest business advisory and restructuring management firm with a demonstrated track record of achieving the best possible outcomes for our clients. And now, we’ve written a book to help our readers understand the issues facing their businesses. You can find this compilation of our business thoughts at: https://revitalizationpartners.com/we-could-write-a-book/ or on Amazon.
We specialize in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations.
Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return
