Restructuring means giving a company a new foundation in the context of restoring its existence and providing it with a foundation that promises the generation of profits. Existence-threatening situations, such as imminent insolvency, blocked credit lines or severe market irritations can hit companies unexpectedly. The current corona pandemic and the resulting acceleration of market changes could be considered such an existential threat. Many companies, such as the automotive and mechanical engineering industries, have had to contend with substantial sales losses, which in some cases have even exceeded 50%. This leads to a situation in which many companies are confronted with considerable drops in orders and liquidity bottlenecks, which require an immediate start of the company’s reorganization, despite state aid.
Future-proof products, accompanied by low efficiency, losses in effectiveness and a high degree of external regulation by banks, since equity capital is almost completely used up, force companies to take decisions about their continued existence. Depending on the company’s situation, there are essentially four possible restructuring options, which, depending on the results of the analysis, focus either on the continuation of the current business activity, the continuation with adaptation of the business system, the orderly withdrawal, or the initiation of insolvency proceedings.
The target of a turnaround is to stabilize the business, in order to get back on track in a sustainable and future-oriented manner. In the short term, liquidity needs to be secured and improved, and in the second step, the focus must be on mobilizing the company to sustainably increase profitability.
ensign advisory’s solution approach comprises four process steps, in which restructuring and further development on a restructured basis are pursued with the goal of achieving a short-term turnaround and mobilizing the company for the future.
To start with, ensign advisory’s consultants prepare a detailed analysis. The result of this detailed analysis is an assessment of the ability to restructure. This can also be certified by ensign advisory within the scope of the preparation of a restructuring concept according to the IDW S 6 standard. The IDW S6 report points out whether a company can be restructured successfully in the long term in a crisis and is therefore fully financed for at least the current and the following financial year, can service all due and maturing liabilities on time with a high degree of probability, is sustainably competitive, and also has an equity ratio and leverage that are within the industry’s usual range.
In the second step, priority is given to financial restructuring, i.e. reducing and managing liquidity requirements, drawing up the debt relief concept and determining restructuring costs, as well as assessing legacy issues/risks.
In the third step, the restructuring focus is on the implementation of structural measures such as the reduction of material and personnel costs, divestments/closures and mergers of strategically irrelevant companies and structurally loss-making companies, capacity adjustments and, most importantly, the establishment of a liquidity and controlling system.
In the fourth step, our consultants focus on the further development and generation of new growth through sustainable measures. We support our client in strategic positioning, identify new business areas/market and value creation potentials, to develop a sustainable concept.
A Transformation Office supports the implementation success of our measures, which provides real-time information on project status/benefits/effort in the form of an online reporting system, thereby reflecting the cost-benefits of individual work packages. Online reporting systems also provide an overview of the realization of potential, i.e., which potentials are currently being processed, how high the realized savings are, and whether target/actual deviations exist, so that we can react to these as quickly as possible.
ensign advisory demonstrably contributes to the success of corporate restructuring with holistic concepts. Our consultants identify savings potentials, help with the reallocation of assets as well as the conversion of liabilities into investments, streamlining of the organization, improvement of purchasing conditions and capacity adjustments in the personnel area. Furthermore, we identify strategic measures in the fields of product/assortment, pricing, distribution and communication policies so as to exploit all optimization potentials and consequently restore capacity utilization. In addition, ensign advisory supports the company management or takes over the implementation of the turnaround itself on an interim basis.
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