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RESTRUCTURE & TURNAROUND
Any type of restructuring could support a business in becoming more efficient, leaner and more focused. The focus of Corporate Lifeline is to assist businesses that are struggling financially to turn their position around.
We work shoulder-to-shoulder with your company’s management, stakeholders and lenders at every level. Our restructuring professionals deliver results to protect, create and maximise value throughout all stages.
Our general advice would be that if there is any uncertainty as to the company’s ability to meet its financial obligations, management should be taking insolvency advice. Read on to find out more about how Restructure and Turnaround can help your business.
WHAT IS RESTRUCTURE & TURNAROUND?
When a company experiences financial difficulties, it may consider entering into a process with its creditors known as corporate restructuring or turnaround, in an attempt to save the company and/or its business.
Many business owners do not know the break-even point for their business and do not adequately focus on the key drivers of profitability. This is a significant opportunity for consulting work for accountants to assist directors with:
Options available to increase revenue or reduce general costs and expenses;
Options available to reduce fixed overheads, such as seeking to renegotiate lease or finance arrangements or arrange exit strategies if lease or finance agreements are no longer necessary;
Strategies which may be available to recover or realise amounts from overdue debtors or the sale of other assets, which may not be of core importance to a company’s business;
Finance options which may be available to provide immediate cash flow; and
Coaching them to “work on, not in” the business. We provide advice, guidance and assistance to accountants and company directors in respect of strategies that can be implemented to turnaround a company’s business so that it may trade profitably in the future.
In some circumstances, we may also be able to assist businesses in negotiating arrangements so that debts owed to creditors may be paid overtime or coming to arrangements with creditors to compromise their debts. Such arrangements can assist a business with immediate cash flow problems by reducing or deferring current liabilities.
What is involved in restructuring and turnaround?
When loans reach maturity or a business outgrows its existing finance arrangements, it can face cashflow or solvency issues. Inappropriate types of funding can be used such as credit cards or letting ATO debts grow. Speaking to the existing bank is the first step. If they aren’t able to meet the financing needs of a business, there are many types of business funding and finance to suit the different needs of business. Determining the right capital structure, seeking out a bank or financier and finalising the deal generally encompass a restructuring engagement. Getting the capital structure right, means a Director can get on with the best use of their time, running their business.
Turnaround: is a broader engagement, focusing primarily on the strategic, financial and operational management of a struggling but viable business to return it to profitability. Often Directors know what’s going wrong with their business but struggle to make the necessary changes.
What are the stages of a turnaround?
Step 1. Initial assessment
A preliminary review is undertaken – identifying the causes and severity of the business’s financial position. In addition, an assessment is made of the future viability of the business. This review will determine the core/non-core business areas, the availability of funding – both short and long term and will include an assessment of the existing resources of the business.
Step 2. Strategic Plan
If the initial assessment indicates that a turnaround strategy has the potential for success, the next stage in the process is the formulation of a strategic plan. This will outline the specific goals and detail the actions and functions required in order to achieve these goals.
The strategic plan must be communicated to and receive the support of the key stakeholders. We liaise with internal and external partners – management, employees, shareholders, bankers, customers and suppliers – to ensure their backing for the plan.
Step 3. Recovery Phase
The objective of this stage of the process is to halt the decline in the financial position of the business and to put in place the structure for the ongoing operations. It is necessary to implement this stage of the strategic plan without delay. Necessary changes such as new management, closure of business units, or termination of employees must be undertaken swiftly to ensure confidence in the overall strategy and to establish improved short -term cash flow.
Step 4. Turnaround Phase
Once the decline has been halted, the focus of the strategic plan will be on core business activities – improving profitability and efficiency.
Existing revenue streams must be secured and enhanced and cost control measures introduced and adhered to
It may be necessary to substantially restructure the business – to develop further markets, discontinue certain products or make market adjustments to remain competitive.
Importantly during the ‘turnaround’ phase, constant communication with all stakeholders is essential. The business is unlikely to have maintained the same structure as that in existence prior to the implementation of the strategic plan. All stakeholders need to adapt to the new organisation and management needs to ensure that everyone is aware of and supports, the shift in focus. This is perhaps one of the most challenging aspects of the business’s turnaround strategy.
Step 5. Ongoing Monitoring
An integral part of the turnaround strategy involves the development of strong financial controls. The introduction of timely management accounting and reporting systems and comparisons with budget projections will provide the restructured business with the tools to survive – and thrive – into the future. Hall Chadwick can advise and assist with implementation of practical reporting systems and, where necessary, monitor ongoing operations.
How does a business know if a turnaround is right for it?
Before any restructure or turnaround is attempted, critical questions must be explored. The first questions to ask are:
- Could this business be viable in future?
- Is it worth the time and cost involved to save it?
- Can it be saved?
- What do the Directors want?
Most simply, a business may engage a professional advisor such as us to assist with an ATO payment arrangement, review finance arrangements, get financial accounts up-to-date and implementing some cost-control measures.
At the more complex end, a company may employ a dedicated restructuring officer to carry out a full range of changes to a business, sell or close various parts of the business and continually improve the business over a number of years until it returns to sustainable profit.
Although it can be difficult to face up to your employees and creditors, you may be surprised at the support you’ll receive from them. No one involved with your business wants to see it fail.
What do restructuring consultants do?
A turnaround strategy is not an option for all businesses suffering financial difficulty. In some cases, a formal insolvency appointment may provide the most appropriate solution.
At Corporate Lifeline our specialist Business Recovery and Insolvency team of official Liquidators and registered trustees in Bankruptcy can provide advice and accept appointments in all corporate insolvency matters including:
- Voluntary Administration
- Deed of Company Arrangement
- Liquidation (including provisional liquidation
- Safe Harbour
- Small Business Restructuring
- We can also assist in personal insolvency administrations and advise on appointments under the Bankruptcy Act.
OUR COMMERCIAL RESTRUCTURE STRATEGY SERVICES
At Corporate Lifeline we have an array of services to cater to any phase your business is in financially.
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