What’s required to turnaround or restructure a company?
2 mins reading time
Who do the financiers hire when they are concerned about a company’s poor financial performance.
What skills are required to restructure a company?
Sometimes a successful turnaround simply requires cost-cutting and better control of cash flow. Sometimes it may be necessary to negotiate payment plans, sell assets, refinance or raise equity to recapitalise.
Some of these are things a business operator can do in-house and sometimes they will need help from outside – to access specialised legal, accounting, IT or engineering skills, or because sometimes it takes an outsider to make the tough decisions that can be challenging emotionally for the executive or business operators.
A good Safe Harbour adviser will make sure that a restructuring plan uses in-house resources to save costs as much as possible and only involves outsiders where it will deliver the best outcome, or the skills aren’t available in-house.
What does a typical turnaround involve?
A financially challenged business doesn’t generate sufficient cash flow to pay creditors on time. Therefore, the first stage of a turnaround strategy is to work out what cost saving can be made, and whether creditors commitments can be rescheduled.
In many cases it is also necessary to restructure the balance sheet. This might involve raising equity or selling assets to reduce the debt load, or refinancing or finding additional finance to fund growth.
Sometimes the debt load is so heavy that the only option is to sell the business altogether. The object then is to maximise its sales price.
Each of these options can be accommodated within a Safe Harbour restructuring plan.
The Safe Harbour law put the onus of proof on company directors. It is up to the directors to show that they have met the criteria. If the books and records are lost or destroyed – for example because a landlord locks the business out and throws out the accounting records – then it is the directors who have a problem.
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What’s required to turnaround or restructure a company?
Who do the financiers hire when they are concerned about a company’s poor financial performance.
What skills are required to restructure a company?
Sometimes a successful turnaround simply requires cost-cutting and better control of cash flow. Sometimes it may be necessary to negotiate payment plans, sell assets, refinance or raise equity to recapitalise.
Some of these are things a business operator can do in-house and sometimes they will need help from outside – to access specialised legal, accounting, IT or engineering skills, or because sometimes it takes an outsider to make the tough decisions that can be challenging emotionally for the executive or business operators.
A good Safe Harbour adviser will make sure that a restructuring plan uses in-house resources to save costs as much as possible and only involves outsiders where it will deliver the best outcome, or the skills aren’t available in-house.
What does a typical turnaround involve?
A financially challenged business doesn’t generate sufficient cash flow to pay creditors on time. Therefore, the first stage of a turnaround strategy is to work out what cost saving can be made, and whether creditors commitments can be rescheduled.
In many cases it is also necessary to restructure the balance sheet. This might involve raising equity or selling assets to reduce the debt load, or refinancing or finding additional finance to fund growth.
Sometimes the debt load is so heavy that the only option is to sell the business altogether. The object then is to maximise its sales price.
Each of these options can be accommodated within a Safe Harbour restructuring plan.
The Safe Harbour law put the onus of proof on company directors. It is up to the directors to show that they have met the criteria. If the books and records are lost or destroyed – for example because a landlord locks the business out and throws out the accounting records – then it is the directors who have a problem.