Professional advisor key to successful restructuring

David Filice • August 12, 2014

For many business owners or managers, working through a distressed situation can be very difficult and time consuming. In many instances, it may be the first time the business has gone through a troubled operating patch. It’s probably human nature to try to resolve the situation yourself, without any outside help – or maybe it’s just a bit of problem avoidance. However, as most people know, problems do not just disappear. They need to be dealt with in a proactive manner. Businesses need to change and adapt over time to meet the challenges they face. Restructuring and Insolvency Advisors deal with troubled businesses on a daily basis and provide the assistance business owners and managers need.

Here are a few reasons why you should consider hiring a Restructuring and Insolvency Advisor to help your business get back on track.

1. Balanced approach to dealing with issues

A professional advisor brings an objective, balanced approach to your restructuring. As an owner or manager, you are closely tied to the day-to-day issues of your business and your decisions may be motivated by fear of the restructuring process. An outside consultant understands the restructuring process and can provide the guidance you need to make the best decisions in a timely manner. In a restructuring, you may not have the luxury of time to make critical decisions. An Advisor who has been through the process many times and has dealt with similar issues has the expertise and experience needed to quickly get you back on the right path.

2. Credibility with Staff

During any restructuring it’s critical to maintain the confidence of your staff. Employees are typically quick to realize when a business is in distress. This can lead to an exodus of staff who, concerned about the stability of your company, choose to leave at a time when their knowledge and expertise are most critical. Your top employees are typically the first to go.
Your team knows that you have not been through a restructuring process before. Hiring an Advisor can provide them with confidence that you are addressing the challenges faced by the company and persuade them that there is a good chance the company will recover. An outside Insolvency and Restructuring Advisor can provide your management team with the credibility it needs to win over the employees and keep morale high.

3. Independent Assessment of the Company’s Viability

There is a difference between building a business and fixing challenges. Many of your internal assessments may be biased or not thoroughly reviewed as compared to industry best practices. An Insolvency and Restructuring Advisor typically begins an independent assessment process by establishing that the company’s operating margins are sufficient. This includes a review of historical financial statements and recent source data to determine if the current situation can be turned around. The outside consultant is typically analytical and inquisitive and provides unbiased conclusions about your business based on objective data.

4. Communication and Credibility with Lenders

Strong communication ensures good cooperation between you and your lenders. In distressed situations, it can become difficult to maintain positive and transparent communication with your lenders in that in most situations the loan is transferred from the bank’s relationship manager to the special loans or workout group. This results in more stringent reporting requirements to the bank. Preparing accurate and effective reports is often the only way your company can keep its lenders’ trust and convince them that your business is viable. Unfortunately, these increased reporting demands come at a time when your management team is knee deep in dealing with other problems and issues and don’t have the bandwidth to handle new responsibilities.

Hiring an Insolvency and Restructuring Advisor, enables your management team to provide the detailed reporting and open communications that are needed to gain the confidence of the bank. Strong Advisors have a positive track-record and are usually well known by Special Loans or Workout groups. A known Advisor provides the bank with confidence that your company is heading in the right direction and getting the advice needed to turn things around.

Overall, hiring an Advisor to help with your restructuring can go a long way to increasing your odds of success. Even considering, a significant restructuring, can be a frightening prospect for most business owners and managers. After all, restructuring is all about change – something many people don’t like. It often seems easier to ignore big issues and hope they will go away. In the case of a struggling business, your first step on the road to recovery, truly is about getting the help you need to address your business’ challenges openly, and objectively, and getting you back on the path to profitability.

David Filice is a Senior Vice President and Partner in the Restructuring and Insolvency Practice of Fuller Landau LLP, Chartered Accountants and Business Advisors.

To contact David, call 416-645-6506 or email .


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