When a financial restructuring transaction completes, the focus then turns to the Day-One position of the restructured entity.
However, this is only the initial stage in the company's life cycle and future value creation
A highly publicised restructuring process can leave a company vulnerable to pressure - in particular the business plan and ability to maximise returns for stakeholders, but what are the most important aspects to consider post-process?
HERE ARE FIVE THINGS WE THINK ABOUT POST RESTRUCTURING:
1. ESTABLISH STRATEGY
- Review the component parts of the restructured business and establish whether these are suitable for turnaround and retention, disposal, or closure.
- Agree a plan with stakeholders for delivering value from each of the component parts giving due care to the liability side of the balance sheet and the risks to a successful outcome.
2. PROTECT VALUE
- In complex corporate structures, high value assets liabilities (e.g. performance bonds, parent company guarantees etc) are often linked to material contingent liabilities outstanding to third parties
- Establishing how these can be managed ahead of a disposal or closure is conducive to a smooth and efficient process, mitigates against potential value chips from purchasers, and makes a transaction more deliverable.
3. ADVISORY SUPPORT
- Whether value is to be realised via disposal or closure, appointing the right advisers is critical. No two transactions are the same, but working with teams that have been in similar situations before is important to a successful outcome.
- Where there is regulatory oversight (merger clearance, pensions etc) this need is magnified, as taking the wrong steps can lead to significant delays to, or the failure of, a potential transaction.
4. STAKEHOLDER MANAGEMENT
- While the board, management team and advisers will be tasked with the value realisation process and negotiation of any transactions, there are likely to be consent rights that mean financial stakeholder(s) have the final say in whether a transaction can be completed.
- Agreeing a detailed and robust value sharing mechanism up front will avoid the need for extensive inter-stakeholder negotiations at the time that focus should be on a transaction with a purchaser, and avoid costs that will ultimately dilute recoveries.
5. SOLVENT BURIAL
- There will inevitably be parts of the corporate structure that do not contain any material value and need to be closed or wound down.
- Due care is needed to ensure that no prejudicial action is taken against external creditors, and that the resolution of any intercompany balances is carried out in a tax efficient manner and without risking unlawful distributions. The support of experienced advisors is critical in this regard.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
