RESTRUCTURING

In the most urgent situations, businesses need to stabilize their finances and improve their operations to preserve value. Corporate restructurings are make or break, requiring focus on both the big picture and the smallest detail. Cash is typically tight, and time is of the essence. We are by your side, as a partner, working with your team to develop and execute restructuring plans that pave the way forward. We advise on every aspect of the process, from strategic direction to liquidity management to business plan development. Working through complex constituency relationships, we help rebuild credibility and reassure creditors that the company is taking steps to face its problems head-on as efficiently and effectively as possible.

Why Do Companies Restructure?
Nowadays, companies have to be consumer-centric if they want to succeed. As Nike likes to say: “consumer decides”. If consumer behaviours evolve, companies need to adjust their organisations to address these changes. Following and creating consumer trends through periodic adjustment can be considered as a non-financial reason for reorganisation. In fact, if restructuring is part of a company’s strategy, it will have a direct impact on long-term financial results.

Examples of internal reasons behind corporate restructuring
Profitability below expectations:

     1. Stagnant or decreasing revenues,
     2. Too low gross margin,
     3. Too high operating costs,
     4. Bad cash flow,
     5. Over- or under-investment,
     6. Productivity/KPIs below market standards,
     7. High labour costs,
     8. Unclear roles & responsibilities,
     9. Poor internal communication,
     10. Lack of leadership,
     11. Bad design of processes,
     12. Marketing budgets allocated ineffectively.

Of course, there are some “easy” ways in which one can address the low profitability problem, for example, through headcount reduction or closing unprofitable stores/branches/facilities/countries. As large organisations tend to grow in an uncontrolled way, such cost cuts may help. Nevertheless, simple cost-cutting exercises may jeopardize the long-term market position of companies affected by such restructuring. It is much more difficult to increase profit by growing revenues, gross margin and through cost optimizing, all at the same time. Such restructuring process is very complex, time-consuming and often requires top management to get out of its comfort zone and to apply strategic thinking. A lack of strategic approach in corporate restructuring is short-term problem fixing or “fire fighting”. You should not forget that “corporate politics” are sometimes the driving force of some organisational restructuring requirements. Some of the transformations have just one goal for top management: to gain more time to stay at their position as long as possible. It is false, but usually minor, scale restructuring.

Examples of external reasons behind corporate restructuring
      1. New consumer trends
      2. Innovations that redefine the market
      3. Company’s market share decrease due to actions of competition

Most companies declare their commitment to address market changes in their strategies, but not many of them really realise this goal in practice. Deep organisational restructuring is not an easy fix and requires radical changes in distribution network, channel management, supply chain, HR policy, production and its sourcing, communication with consumers, product/category management, etc.