News and insights | Value Delivery and Exit Planning Following a Restructuring

Value Delivery and Exit Planning Following a Restructuring

November 2022

Much of the focus on a financial restructuring transaction is the day one position of the restructured entity, but this is just the starting point for the next stage of the company's life cycle and of future value generation.

The challenges that are faced by a company that has been through a highly publicised restructuring process can leave it vulnerable to pressures on its business plan and in a sub-optimal position to maximise returns for stakeholders, particularly where a break up of the Group is the optimal route to value.

Here are five things we think about post restructuring:

  • 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.
  • A complex corporate structure often sees high value assets being linked with material contingent liabilities (e.g. performance bonds, parent company guarantees etc) 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.
  • 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.
  • 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 consummated.
  • 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.
  • 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.

Across our CRO and Value Delivery service lines, we provide support and deep situational experience to address the challenges facing stressed and distressed businesses.

Our approach is to provide small, hands-on teams with relevant experience to work alongside companies and their boards, providing management with the necessary bandwidth to focus on the day to day running of the company.

In situations with extensive government and regulatory oversight, we regularly partner with subject matter experts, drawing from our extensive network of contacts and relationships.

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