Turnaround and Restructuring Consultant
Turnaround and Restructuring Consultant, often described as an emergency room (ER) job, there to save companies in difficulty, the restructuring industry is in full swing in times of crisis. Yet associated with the culture of rebound, restructuring, which refers to the operations necessary to reorganize a company in difficulty according to new principles, comes up against psychological barriers and cognitive biases that are formed when mentioning difficulties. Less and less stigmatized and taboo, this market offers many opportunities for both current and future professionals in the sector.
So what is restructuring and what are the different types? What are the different stages of a restructuring process? Who are the players in the sector? How to make a career in restructuring?
Turnaround is to corrects business losses, bad debt structures, cash shortfalls, and other factors that have put the business into its cash crisis. AB Consulting will allow your company to move from a situation of insufficient profitability to a competitive situation.
What is a turnaround and restructuring consultant?
A turnaround and restructuring consultant is a professional who specializes in helping struggling businesses to overcome financial difficulties, stabilizing it and return to profitability.
Why do you need to hire the Turnaround and Restructuring Consultant?
A turnaround and restructuring consultant is a professional who helps struggling companies to improve their financial performance and regain profitability. These consultants are typically hired when a company is facing financial difficulties, such as declining revenue, mounting debt, or operational inefficiencies.
Restructuring: what are we talking about?
Generally, restructuring, business turnaround or restructuring, is a sector in which companies can be in a situation of operating underperformance, financial difficulties or cash flow crisis, but not only. Indeed, restructuring is a polysemous term that designates a management operation, generally decided by the manager of a company, and consisting in reorganizing it in order to reach a new configuration to remedy its situation. In the collective imagination, it consists of the implementation of operations to ensure the profitability of a company and is often associated with layoffs or the closing of factories. However, this is not always the case. Indeed, there are different types of restructuring; and they can take place preventively, without systematically generating redundancies.
The restructuring does not mean that the company will file for bankruptcy, that would be a reductive vision.
Restructuring is a term that encompasses all professionals working in the assistance of companies and organizations in difficulty (audit, strategy, consulting firm, lawyers, investment banks, etc.). In this market, three main categories of players should be noted: debtors (the company for example), creditors (which may correspond to banks) and shareholders (of the company in question). The particularity of this sector is that it requires a certain financial but also legal technicality.
Lists 3 types of interventions in the support of companies in difficulty offered by the audit firm:
- without legal proceedings (40% of files),
- within the framework of an amicable procedure
- ad hoc mandate or conciliation (40% of files) and in the context of collective safeguard, receivership or judicial liquidation proceedings (20% of files).
Hence the usefulness of having financial and legal knowledge to know the specifics of such procedures.
Concretely, what are the main steps of an effective turnaround and restructuring process?
There are different stakeholder profiles (creditors, debtors, shareholders and investors) and various initial situations: a manager can directly consult restructuring professionals because he is faced with a situation from which he sees no way out; the company in difficulty can be identified and canvassed following a market watch; restructuring professionals can also support shareholders or seek an investor in the takeover of a company in difficulty.
The different stages in the restructuring of a company
The different stages in the restructuring of a company take place as follows:” is already a complete sentence. However, here’s a variation: “The restructuring of a company typically involves several stages, which occur as follows:
The first step in restructuring a company is to determine how the company found itself in such difficulties in order to carry out a diagnosis showing the complexity of the current situation.
2. Critical review of the turnaround plan and forecasts
Then, you have to understand what the company’s prospects are and how much profit and cash it will be able to generate to repay its debts in the future. We must revise our forecasts taking into account the market outlook. In this context, there are two dimensions: strategic and commercial with regard to the forecasts that have been made. Then, a review of the turnaround plan is planned with, in parallel, the implementation of actions to relaunch the company (reduce the cost structure, request for additional payment terms from creditors, waiver of part of the debt, new financing, redundancy plan, defining the most favorable market for relaunching, etc.). It is then a question of taking this business plan into account, of gauging its realistic and achievable nature and of what this plan implies in terms of financing needs. This step brings together all the dimensions of the company: communication, operational, tax, legal, etc. So, the turnaround plan is about answering the question: going forward, what can the business generate in terms of profitability and spend on paying down its debt?
3. Definition of the sustainable level of debt
Finally, the company defines its level of sustainable debt by trying to find a solution for its current debt and the needs generated by the business plan according to the urgency and the amount of the planned investment. From a financial point of view, the financial restructuring will consist in finding a solution around a shared effort (shareholders who participate, request an effort from the creditors). In short, it is a question of defining the level of sustainable debt resulting from the business plan previously constructed and of recording the financial restructuring.
4. The cures
During the various missions, AB Consulting identified two major business models:
Companies that succeed and benefit from a virtuous circle that corresponds to:
- A team with satisfied, competent, motivated staff…
- A constantly improving internal production process
- Customers satisfied with the services, the products purchased…
- Shareholders, funders, partners satisfied with dividends, interest, and payment terms.
Companies that are facing failure and a vicious circle that corresponds to:
- A dissatisfied team, with divisions between sales and production
- An internal process in constant dysfunction
- Customers with non-compliant, unsuitable services, goods, etc.
- Disappointed partners, with reduced dividends and interest, paid like late invoices.
The tools put in place will make it possible to move from a vicious circle to a virtuous circle and thus find the path to profitability, in particular by developing a recovery plan adapted to the situation.
The most requested services from our Business Restructuring Consultants and Main Missions
Working capital requirement optimization
Determine the level of internal WCR that allows you to streamline your processes and avoid outsourcing.
Financial risk analysis
Reveal current financial risk to effectively redirect restructuring toward cost-cutting practices. A turnaround and restructuring consultant will perform a comprehensive analysis of the company’s financial situation to identify areas of weakness and opportunities for improvement. This analysis will include reviewing financial statements, analyzing cash flow, and identifying cost-saving opportunities.
Cash flow management
A consultant can help the company to manage its cash flow more effectively by implementing strategies to improve collections, renegotiating payment terms with suppliers, and identifying opportunities to reduce costs.
A consultant will work with the company’s management team to develop a restructuring plan that addresses the root causes of the company’s financial difficulties. This plan may involve restructuring debt, renegotiating contracts, or selling non-core assets.
Once a restructuring plan is in place, the consultant will help the company to execute the plan and implement a turnaround strategy. This may involve identifying new markets, developing new products or services, or improving operational efficiency.
Stabilization of operations
Quickly and sustainably reengineer business processes to ensure continuous value creation from operations.
Embed designing and streamlining your restructuring efforts into your practices to achieve operational excellence.
Maintain and enhance your relationships with key stakeholders to maintain your credibility throughout your restructuring. A consultant will work closely with the company’s stakeholders, including creditors, investors, and employees, to ensure that everyone is aligned with the company’s turnaround plan.
Interim Management and implementing changes
Make downsizing efforts a natural part of your business operations without hurting company morale. In some cases, a turnaround and restructuring consultant may be brought in to serve as an interim CEO or other executive to help guide the company through the turnaround process.
Overall, a turnaround and restructuring consultant can provide valuable expertise and guidance to struggling businesses, helping them to overcome financial difficulties and return to profitability. With their help, companies can develop a comprehensive plan to address their financial challenges and achieve long-term success.
Who are the restructuring actors?
In a corporate restructuring, there are several key players or actors involved. These include:
The company’s management team is responsible for identifying the need for restructuring and developing a plan to implement it. For example, the management team of a struggling retail chain may develop a financial restructuring plan that involves closing unprofitable stores and renegotiating leases.
2. Board of Directors
The board of directors is responsible for overseeing the management team’s restructuring plan and ensuring that it is in the best interests of the company and its shareholders. For example, the board of directors of a publicly traded company may approve a financial restructuring plan that involves issuing new shares of stock to raise capital.
Shareholders have a vested interest in the success of the company and may need to approve certain aspects of the restructuring plan. For example, shareholders may need to approve a plan that involves issuing new shares of stock or selling off non-core assets.
Creditors, including banks and other lenders, may need to approve a restructuring plan that involves changes to the company’s debt obligations. For example, a company may negotiate with its creditors to reduce its debt load or to extend the maturity of its debt.
Employees may be affected by a restructuring plan, and the company may need to negotiate with unions or other employee representatives to make necessary changes.
6. Restructuring Advisors
These are professionals, such as turnaround consultants, financial advisors, and lawyers, who provide expertise and guidance in the restructuring process. For example, a company may hire a financial consultant to perform a comprehensive analysis of its financial situation and identify areas for improvement.
7. Regulatory Authorities
Depending on the industry and the nature of the restructuring, regulatory authorities may need to be consulted or approvals may need to be obtained. For example, a company in the healthcare industry may need to obtain regulatory approvals to sell off certain assets.
Overall, the success of a corporate restructuring depends on the cooperation and coordination of these various actors. Each one plays a crucial role in ensuring that the restructuring plan is well-executed and achieves the desired results.
The actors of financial restructuring
The actors involved in financial restructuring can vary depending on the specific situation. However, some of the key players typically include:
Investment banks can act as intermediaries that support companies. We have a specialized “restructuring & debt advisory” team. It intervenes on behalf of companies, banks or buyers. Examples of investment banks: JPMorgan Chase, Bank of America, Wells Fargo, Citi, Rothschild & Cie acts on behalf of borrowers or creditors.
We are particularly involved in LBO financing or corporate files and works in collaboration with our mergers and acquisitions department. According to a banker, mergers and acquisitions analyst, the restructuring practiced in investment banking is roughly similar to that practiced in the Big 4 where they are often competitors on mandates. The difference lies above all in the prices of the services provided, which are lower in the Big 4. Also, accounting skills are more sought after by recruiters in the Big 4 than in investment banking.
Turnaround funds, also called turnaround capital funds, invest in companies in difficulty (large debts, internal problems) with the aim of “turning around” the situation by restructuring the target’s activities, providing financial and humans.
With 4 main techniques
- Retrenchment: this can be done by selling assets, abandoning difficult markets, stopping unprofitable production lines, downsizing and outsourcing.
- Repositioning: includes development of new products, entering new markets, exploring alternative sources of revenue and modifying the image or the mission of a company.
- Replacement: new managers bring recovery and a strategic change, as a result of their different experience and backgrounds from their previous work.
- Renewal: 1st step to analyze the existing structures within the organization and may end with a closure of some divisions, a development of new markets/ projects or an expansion in other business areas.
There are judicial banks specializing in the financing of companies in difficulty. For example, Thémis Banque has been a bank totally dedicated to companies in difficulty since 2002 and experienced in prevention and collective procedures. Its objective is to help business leaders quickly set up financing adapted to their difficulties to ensure their cash flow and prepare for the rebound in activity. We can also mention the judicial bank Delubac which supports companies in turnaround or in difficulty. Here, judicial banking is one of its businesses among others (private banking, corporate banking, etc.).
Special business representatives in traditional banking
Banking special case representatives are responsible for defending creditors and discussing with companies to find solutions. For example the bank has implemented unified risk governance within the various bank subsidiaries and has developed special business in a natural way in view of the difficulties encountered by companies: The The bank’s role is to take a forward-looking look at the warning signs of companies’ difficulties in order to anticipate the deterioration of their credit quality and to warn companies of the banks’ reaction, in the event that they do not want to provide additional funding.
Interim Administrative and Financial Director (CFO)
Géraldine Astrup, associate lawyer at Astrup-Tellechea and President of the Association of Young Restructuring Professionals, remarks on the development of the role of transitional Administrative and Financial Director (CFO), which “allows the financial director already present in the company to stay there and support it, which contributes to a more positive perception on the part of the market thanks to the latter’s retention. Indeed, it will provide expertise in managing difficulties and will allow the financial director in place, faced with a team that is sometimes overwhelmed, to be supported. Finally, for the CEO, the presence of a transitional CFO will give strength and credibility to his speech”.
Upstream of the restructuring of a company, we find hedge funds which are risky investment funds with speculative purposes, little or not regulated and whose objective is maximum performance for their investors. They may use derivatives (options for example), and use leverage as well as high-frequency and algorithmic trading. One of their possible strategies is the “distressed” strategy, i.e. taking long positions (purchase at a high asset discount) in entities in financial distress.
What and how can we help you?
Here are some of the tasks that a turnaround and restructuring consultant may undertake:
1. Conduct a comprehensive review of the company’s financial performance, operations, and organizational structure.
2. Develop a plan to address the underlying issues and improve financial performance. This may include reducing costs, restructuring debt, divesting non-core assets, or reorganizing the company’s operations.
3. Implement the plan by working closely with the company’s management team and employees. This may involve making difficult decisions such as restructuring or downsizing the workforce.
4. Monitor progress and adjust the plan as necessary. Turnaround and restructuring consultants are often hired on a temporary basis to help companies navigate difficult periods. Therefore, it’s important to continuously monitor progress and adjust the plan as necessary to ensure long-term success.
5. Provide guidance and support to the company’s management team throughout the process. This may include providing advice on financial management, operations, and strategic planning.
Overall, a turnaround and restructuring consultant can help companies to identify and address underlying issues and improve your financial performance. This can involve making difficult decisions and implementing significant changes to the company’s operations, but can lead to long-term success and profitability.
Photo credit (main picture): geralt via Pixabay
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