Restructuring concepts and implementation
Restructuring concepts (or restructuring reports) and their implementation belong together. A concept alone makes no sense if not incorporated into operational practice, nor is it purposeful to act without a concept if the company is to be brought back on track.
Should entrepreneurs notice that their company is no longer running smoothly, they must consider how to identify the causes of the crisis and how to develop measures going forward in order to restore the company’s stability. The banks involved often call for a restructuring concept in accordance with IDW S 6 or a restructuring concept in accordance with current BGH case law. Sometimes the term "Independent Business Review (IBR)", is also used, which is an abridged restructuring report.
Restrukturierungspartner develop these restructuring concepts jointly with the client!
We analyse the company in question, jointly develop restructuring measures and present everything in a restructuring concept that is comprehensible to banks and any other parties involved. This forms the basis for necessary decisions to be made by the financers regarding the further support of the company.
What are the core components?
The core components of a restructuring concept as per IDW S 6 or according to the case law of the Federal Court of Justice:
Presentation and analysis; as a rule, these include:
- Current economic situation
- Short-term liquidity planning
- Classification of the crisis stage
- Market and competitive situation
- Operational processes, value chain
Mission statement; including:
- Core competencies
- Strategic orientation... this can include any conceivable new orientation such as further growth, acquisition of other companies, focusing on certain products or business areas
Restructuring measures; including:
- Financial measures to restore or maintain the solvency of the company and to strengthen its equity capital
- Operational measures to optimize the value chain
- Strategic measures to move the company in the direction of its mission statement
Integrated planning calculation:
- Illustration of the development of the profit and loss account, balance sheet and liquidity over a period of approx. 3 years
- Presentation of the effects of the planned restructuring measures
Once the restructuring concept has been drawn up, the first step is to talk to the financers involved.
They need to continue supporting the company by keeping the credit lines open or providing fresh money to give the company time to safely implement the operational and strategic restructuring measures.
While in many cases the restructuring report can be prepared within a period of 6-8 weeks, the implementation of all restructuring measures takes much longer.
What does successful implementation involve?
Successful implementation often involves:
- Setting up external restructuring reporting to regularly inform financers on the progress of the restructuring process, independently of third parties.
- Appointing an interim manager for special tasks, e.g. in purchasing, sales or production, should the company itself not have sufficient capacity or know-how. As a rule, the interim manager is assigned temporarily in order to empower the company or its employees.
- In larger and/or complex cases, appointing a restructuring manager or CRO (Chief Restructuring Officer), who organizes and takes responsibility for the restructuring concept from within the company, is an ideal solution. The CRO is the first point of contact for all matters relating to restructuring, both internal and external, and can therefore also implement unpopular decisions more easily than the incumbent management.
- A steering committee is set up, comprising the company itself, the restructuring consultant, the CRO and, in particular, some of the financers. The task of this committee is to monitor the restructuring process and advise the company on key issues.
We see the entire implementation phase as "Helping people to help themselves“: Our task is only fulfilled when, after a period agreed by all parties the company is healthy, competitive and independent again. This is the sole aim of the restructuring concept and its implementation!