RESTRUCTURING FOR GROWTH REVIEW, RESET, REBUILD
To facilitate decision making, RSM Ireland work with business leaders and management to formulate objectives that provide direction and purpose, writes head of Restructuring Advisory
Having survived Covid and following the withdrawal of government support measures, companies must now deal with inflationary cost pressures, rising interest rates, continuing supply chain issues, and labour shortages. All these factors suggest the Irish economy faces challenges in the medium term, and many previously robust businesses are struggling to identify solutions to these issues, which is undermining their viability.
At RSM we work with our consulting colleagues from Restructuring Advisory, HR Transformation and Change to Corporate Finance and Technology to assist clients in reviewing, resetting, and rebuilding their business model.
REVIEW
Companies must Review their performance to identify weaknesses in their business model and to set short and medium-term priorities. Many companies have encountered serious issues with contractual obligations, including delays to commencement of projects and inflationary pressures on fixed-price contracts. A reorganisation of the contractual base can address the losses and ongoing costs associated with problem contracts.
Many companies seem financially healthy — trade is picking up and they have cash in the bank. However, many firms have built-up significant creditor arrears, including rent and Revenue debts. Unwinding of these arrears and weaker trading performance will place strain on company cash flow. Many businesses are not equipped to prepare accurate forecasts to manage this process and inform their stakeholders.
RESET
To Reset your whole business or a particular division, it is important to understand the options available, the associated benefits, and the step-plan required to deliver changes, be that streamlining operations, reducing operational costs, exploiting new markets, or exiting-loss making contracts. Our approach at RSM includes identifying and evaluating potential strategies and understanding the interaction with the various stakeholders in the business. This includes looking at: Management incentives. A company’s value may be affected by issues including the pandemic, a shift in the market, supply chain problems, or inflation. Aligning management interests to ensure these key stakeholders are motivated and their interests match those of shareholders is essential. Ringfencing liabilities or onerous contracts. This can reduce the associated drag on profitability and cash and can be implemented through negotiations or a formal restructuring process, and would typically form part of a wider reorganisation.
Funding/Financing. A company’s capital/debt structure may be undermined because of underperformance, or a change in the investors’ or lenders’ strategic direction. It is worth considering the appropriateness of the funding structure required to support short- and long-term ambitions. Implementation of cost reduction processes. Certain changes can be made swiftly, allowing management to deliver additional value.
REBUILD
Despite the uncertain economic climate, businesses must continue to develop and Rebuild. This is necessary to incentivise and reassure staff and stakeholders, but should also ensure that businesses are well placed to take advantage of improving and evolving economic trends.
To facilitate decision-making, RSM work with business leaders and management to formulate objectives that provide direction and purpose. These objectives help both to motivate employees and to set targets that can be used to measure progress. A project plan is required outlining a company’s goals, the specific tasks required to achieve the goals, and making clear what a successful outcome is. Workforce investment is needed to ensure the correct level of skills are created, and that employees are engaged and retained via appropriate incentives and clear career paths.
Professional advice can deliver real value across a variety of areas (including finance, strategy, business modelling, technology) and should be utilised where available. Too often, management teams try to go it alone and that results in otherwise avoidable issues.
Company stakeholders with a vested interest include owners, managers, investors, employees, customers, and suppliers. Their support must be obtained so that a company can return to healthy profit, by finding the right balance between the needs and incentives of the various stakeholders.
Leadership means bravely making the changes needed to operate in a vastly changed landscape. However, the decisionmaking process must be one of calculated risk taking, supported by careful deliberation and preparation which requires appropriate Restructuring professional support. RSM assist companies in reviewing, resetting and rebuilding their businesses in this challenging business environment.