Diagnosis & Formulate Options

2.1 - Financial Review

BDO’s Financial Review services are an essential component of our Restructuring Advisory practice; informed decisions require robust information.  Without effective, objective analysis and understanding of a business’s current position, trading history and projections, a credible restructuring plan cannot be formulated.

Although each business is unique, we set out below some common areas where financial review is undertaken:

• Review of current financial position
• Review of historical trading
• Review of projected trading
• Identification of the key business drivers
• How resilient is the business to factors outside of management’s control?

2.2 - Operational Review

The key to delivering successful operational restructuring programmes is execution performance of the various profit improvement initiatives to be implemented. We recognise the difficulties in delivering complex operational restructuring projects and have developed our operational review methodology to assist our clients understand and resolve implementation issues:

The key considerations that may impact execution performance of profit improvement initiatives are:

• A management team that have historically struggled to implement change
• Initiative overload
• Excessive overheads given the size of the business
• Poor performance measurement / lack of improvement metrics
• History of margin pressures and a business cycle requiring periodic cost cutting
• Complex supply chain issues causing margin pressures
• Substantial asset base that may be under-invested and requires CAPEX

We advocate that all functions have operational processes which accrue cost and rely on cash. Operations therefore are not just about supply chain or manufacturing. Our approach is to divide the operational review into 3 key areas:

•   Demand generation
•   Demand fulfilment
•   Business control

2.3 - Strategic Review

Restructuring processes are becoming more sophisticated and stakeholders take steps to manage investments before they become financially distressed. 

Understanding a business in its competitive environment is vital to understanding what businesses it should or should not be in and, more importantly in a restructuring context, where scarce capital resources should be focussed.

Our Strategic Consulting team can provide valuable advice in this area.  Common areas we are asked to look at are set out below.

• What key markets does the group operate in?
• Where do the group’s products fit into them?
• What are the competitive pressures on the group and its products?
• Where should the group focus its resources in the short, medium and longer terms? 

2.4 - Contingency Planning

The aim of restructuring a business is to avoid a formal insolvency process.  However, it is often prudent to plan for how such an insolvency process might be implemented, should the restructuring not be possible.  Being prepared for all eventualities makes good management sense and should mean fewer surprises for stakeholders.  There is sense in the maxim “hope for the best, plan for the worst”.

We have decades of experience of planning and executing complex formal insolvency processes, across many sectors.  Although each situation is likely to be unique, the following are common areas that need to be considered as part of any well-thought out contingency planning exercise.

• Where value is in the group?
• Company or entity realisation
• Asset-driven realisations
• Who are key stakeholders

Stage three >