Michael Tait, experienced corporate recovery and company turnaround chairman, sets out the key elements of corporate recovery, the skills needed and what goes into a corporate recovery or company turnaround plan.
WHAT IS CORPORATE RECOVERY?
Corporate recovery refers to the process of rescuing a financially distressed company and returning it to a stable and profitable financial position. It typically involves identifying and addressing the underlying issues that caused the company’s financial problems. It also involves implementing a plan to improve its financial performance and cash flow.
The goal of corporate recovery is to save the company from bankruptcy or liquidation and restore value to stakeholders, including shareholders, creditors, employees, and customers. The process may involve restructuring the company’s debt, reducing expenses, divesting unprofitable business units, and implementing new management strategies.
Corporate recovery is an important aspect of corporate finance and is often led by turnaround specialists or corporate restructuring firms. The process can be complex and time-consuming, but if successful, it can save a struggling company from financial ruin and create long-term value for stakeholders.
THE ROLE OF THE CORPORATE RECOVERY SPECIALIST
A corporate recovery specialist, also known as a company turnaround specialist, is a professional who is skilled in helping financially distressed companies recover from financial difficulty and return to profitability. They are typically hired by companies that are struggling financially or are at risk of bankruptcy. Sometimes a company turnaround specialist such as an interim chairman, will be brought in by private-equity or venture capital investors to lead the recovery.
Corporate recovery specialists have a deep understanding of financial management, operations, and legal issues related to restructuring and insolvency. They work closely with management and stakeholders to assess the company’s financial situation and identify the underlying causes of its financial distress. They then develop and implement a plan to restructure the company’s operations, finances, and debt, with the aim of returning the company to profitability.
Corporate recovery specialists may work in various roles, such as consultants, interim managers, or advisors to distressed companies, lenders, or investors. They may have expertise in specific industries, such as manufacturing, retail, or real estate.
The work of a corporate recovery specialist is challenging and requires a range of skills, including financial analysis, negotiation, communication, and leadership. A successful corporate recovery specialist can help save struggling companies from financial ruin and create value for stakeholders.
THE ALL IMPORTANT CORPORATE RECOVERY PLAN
A corporate recovery plan is a comprehensive strategy developed by a corporate recovery specialist or a turnaround team to address the underlying causes of a company’s financial distress and to restore it to profitability. The plan typically includes several key elements, including:
Financial analysis: The recovery team conducts a detailed analysis of the company’s financial statements, cash flow, and debt structure to identify the root causes of financial distress.
Stakeholder analysis: The recovery team identifies and analyses the needs and concerns of the company’s stakeholders, including shareholders, creditors, employees, customers, and suppliers.
Restructuring: The team develops a plan to restructure the company’s operations, finances, and debt to reduce costs, improve cash flow, and pay down debt.
Management changes: If necessary, the recovery team may recommend changes to the company’s management team, including the appointment of an interim manager to oversee the recovery process.
Divestitures: The team may recommend the sale or closure of unprofitable business units or assets to improve the company’s financial position.
Capital restructuring: The team may develop a plan to raise capital through equity or debt financing, or negotiate with creditors to restructure debt.
Operational improvements: The team may recommend improvements to the company’s operations, such as cost reductions, process improvements, or product line changes.
Marketing and sales improvements: The team may recommend improvements to the company’s marketing and sales efforts to increase revenue and profitability.
Risk management: The team may develop a risk management plan to mitigate risks and ensure that the company remains financially stable.
A corporate recovery plan is customised to the specific needs and circumstances of the company and is developed with the aim of returning it to profitability while also satisfying the needs of its stakeholders. The plan is typically reviewed and revised regularly as the recovery process progresses. Investors will carefully scrutinise the corporate recovery plan to decide if they will underpin the process of turning the company around. The quality of articulation is critical to securing investor backing.