Reorganization, restructuring and consolidation programs
Cases concerning reorganization and restructuring for consolidation require special handling, are complex, time-consuming, and highly difficult.
To discuss your case, get in contact with us today or make an appointment at one of our Cyprus office locations.
Key contact: Nicolas Agathocleous, Partner, Board Member
Gold Award to RSM advisory team
Q: Recently, your company has been awarded in the category of Successful reorganization, restructuring and consolidation programs. Share with us some of the main points of the case that needed special consideration and approach?
N.A.: The RSM advisory team has recently been awarded in the category Successful Reorganization, Restructuring and Consolidation Programs with the Gold Award for its successful approaches and case management strategies offered to a wide range of clients from different market segments.
One of the cases we had managed, that I must say was quite demanding and complicated, concerned a company that was one step before collapsing and terminating its operations. Excessive borrowing, public debt, large debts to merchants and other creditors had led the company to a free fall with its financial results not being able to meet its obligations. Furthermore, the company was inconsistent with its loan obligations, resulting in court decisions against it by the financial institutions it worked with, which jeopardized its operations.
Via a thorough study and analysis of the company's data and projections, our approach focused on two main areas. The first area identified strategies to develop its business operations and enhance its profitability to strengthen its liquidity. At the same time, the second area concerned the consolidation and management of the company's financial obligations.
Based on the first area target, within a year of providing our consulting services, the company recorded more than 25% increase in its sales, while its profitability increased by 18 times compared to previous year's results.
After our in-depth analysis and negotiation with many financial institutions, the second area concerned the repayment of the company's obligations; we decreased lending by more than 80% and increased the working capital. At the same time, public debts and creditors were entered into a repayment program within safe outlines and schedules for the company.
Reorganization and restructuring indications
Q: In general, when does a company usually proceed with reorganization and restructuring? Are there any indicators or points that signify these procedures?
N.A: Generally speaking, a company proceeds with reorganization and restructuring strategies either entirety or in one of its activity sectors to overturn adverse conditions created or prevent unfavourable situations that are forecasted to negatively affect the development of the company.
The purpose of reorganization and restructuring is to reach the company's goals and strategies and implement the business plans set.
Internal and external factors determine whether a company will need to proceed with reorganization and/or restructuring.
In most cases, internal factors tend to be more predictable and can be identified via economic and non-economic indicators when evaluating historical and future data.
On the other hand, external factors are less predictable. To identify external factors, you need to perform a more comprehensive analysis of the economic forces and trends and take into consideration a variety of factors that may affect directly or indirectly the company's growth.
At this point, it is noteworthy to mention that unfortunately, in Cyprus, many entrepreneurs do not have in place appropriate mechanisms for tracking, monitoring, and evaluating their financial data to identify in time problems that may affect the development of their company in order to adapt their strategies. As a result, they often realize the problem when the company is already in an unfavourable situation.
Strategies and procedures
Q: To achieve a successful reorganization and restructuring, it is necessary to follow a carefully studied and structured methodology and process which aim to achieve a specific desired result. What primary data need to be analysed to determine the strategies and procedures to be followed?
N.A: Several factors may generate the need for a business to proceed with restructuring and reorganization procedures, including new competition entering the market, high production and/or operating costs, inadequate financial controls, unpredictable demand shifts, mismanagement, lack of liquidity, over-indebtedness, etc.
Each case is unique; it has its own specific characteristics and needs a tailored approach to determine the strategy and implementation plan. However, the goal always remains the same; the continuation and development of the company's activities and the improvement of its financial indicators.
Therefore, a multilevel analysis of the company should be performed to determine the appropriate strategy that will lead to the desired results. Indicatively the data analyzed in such cases concern:
- the history of the company and its course during its years of operation,
- the reasons why the company found itself in such an unfavourable situation,
- the projections it has in the area in which it operates but also the general economic environment,
- improvements that can apply in the business operations and structure to achieve economies of scale, cost controls, development of its production processes and promotion activities, etc.
- its assets and how they can be used either to generate additional income or to raise liquidity,
- the liabilities of the company towards the financial institutions or creditors and how they are served.
Q: What approach and methodology does RSM Cyprus follow in customer management?
N.A: Nowadays, companies operate in a very competitive environment, with high operating costs, fast-paced shifts in technology, changes in know-how, strict and continuous alterations in legislation and compliance issues that make the business management and operation complex and multidimensional.
We, as RSM, have our own philosophy and our own approach towards our customers. The Power of being understood is the principle we support and follow.
We listen to our client's needs; we focus on understanding the company's vision and how it works, its activities, concerns, and problems. Via this knowledge, we can propose strategies and procedures that will lead to the best possible results. We are next to our clients, and we know their business problems and concerns. Therefore, we always propose suitable and effective solutions for each client individually, taking into account all the parameters that may affect the development of their company.
As the 6th largest international network of auditors, tax and consulting professionals, we aim to serve local and international businesses by offering a wide range of services that cover the needs of each client separately.