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Reorganization and restructuring with a view to consolidation require special treatment, are complex, lengthy and very difficult.
Gold medal for the RSM advisory team
Q: Recently, your company was recognized in the Successful Reorganization, Restructuring and Consolidation Programs category. Share with us some of the main points of the case that required special attention and approach?
N / A: RSM’s advisory team was recently recognized in the Successful Reorganization, Restructuring and Consolidation Programs category with the Gold Award for its successful approaches and case management strategies delivered to a wide range of clients from different market segments. .
One of the files that we had managed, I have to say it was quite demanding and complicated, concerned a company that was a step before it collapsed and closed its activities. Excessive borrowing, public debt, large debts to traders and other creditors had driven the company into a free fall with its bottom line unable to meet its obligations. In addition, the company failed to meet its loan obligations, resulting in court rulings against it by the financial institutions it worked with, putting its operations at risk.
Through in-depth study and analysis of company data and projections, our approach has focused on two main axes. The first area has identified strategies to develop its business operations and improve its profitability to strengthen its liquidity. At the same time, the second axis concerned the consolidation and management of the company’s financial commitments.
Based on the first area target, less than a year after providing our consulting services, the company has seen a more than 25% increase in sales, while profitability has increased 18-fold from results. of the previous year.
After our in-depth analysis and our negotiations with numerous financial institutions, the second axis concerned the reimbursement of the company’s bonds; we have reduced loans by over 80% and increased working capital. At the same time, public debts and creditors have been put into a repayment program within secure limits and deadlines for the company.
Indications of reorganization and restructuring
Q: In general, when does a business typically reorganize and restructure? Are there any indicators or points that signify these procedures?
N / A: In general, a company carries out reorganization and restructuring strategies either in its entirety or in one of its sectors of activity, to reverse the unfavorable conditions created or prevent unfavorable situations likely to affect negatively. business development.
The purpose of reorganization and restructuring is to achieve company goals and strategies and to implement defined business plans.
Internal and external factors determine whether a business will need to reorganize and / or restructure.
In most cases, internal factors tend to be more predictable and can be identified through economic and non-economic indicators when evaluating historical and future data.
In contrast, external factors are less predictable. To identify external factors, you need to perform a more comprehensive analysis of economic strengths and trends and consider a variety of factors that can directly or indirectly affect the growth of the business.
At this point, it should be mentioned that, unfortunately, in Cyprus, many entrepreneurs do not have the proper mechanisms to track, monitor and evaluate their financial data in order to identify in time the issues that may affect the development of their business in order to adapt their strategies. As a result, they often become aware of the problem when the company is already in an unfavorable situation.
Strategies and Procedures
Q: To be successful with reorganization and restructuring, it is necessary to follow a carefully researched and structured methodology and process that aims to achieve a specific desired result. What primary data should be analyzed to determine the strategies and procedures to be followed?
N / A: Several factors may create the need for a company to proceed with restructuring and reorganization procedures, including the entry of new competitors into the market, high production and / or operating costs, inadequate financial controls, changes unpredictable demand, mismanagement, lack of liquidity, over-indebtedness, etc.
Each case is unique; it has its own specific characteristics and requires an adapted approach to determine the strategy and the 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 multi-level analysis of the business should be performed to determine the appropriate strategy that will lead to the desired results. As an indication, the data analyzed in such cases concern:
- the history of the company and its history during its years of activity,
- the reasons why the company found itself in such an unfavorable situation,
- the projections it has in the area where it operates but also the general economic environment,
- improvements that can be applied to the operations and structure of the company to achieve economies of scale, cost controls, the development of its production processes and promotional activities, etc.
- its assets and how they can be used either to generate additional income or to increase liquidity,
- the company’s commitments to 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, rapid technological developments, changes in know-how, strict and continuous changes in legislation and compliance issues that make management and complex and multidimensional business operations.
We, as RSM, have our own philosophy and our own approach to our customers. The power to be understood is the principle that we support and follow.
We listen to the needs of our customers; We focus on understanding the company’s vision and how it works, its activities, concerns and issues. Using this knowledge, we can suggest strategies and procedures that will lead to the best possible results. We are next to our customers and we know their issues and concerns. Therefore, we always offer suitable and effective solutions for each client individually, taking into account all the parameters that may affect the development of their business.
As the 6th largest international network of auditors, tax specialists and consulting professionals, we aim to serve local and international businesses by offering a wide range of services which cover the needs of each client separately.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.