Is The Company Viable For A Restructure?

Most companies can be restructured and most can cut costs – see our guide to cost cutting here , even if the directors think they have cut costs. Most can increase prices (yes I know many of you think it is not possible) and most can increase margins. Almost every business can collect its cash in quicker.

If all of these things are taken together, then even distressed companies can see a viable future. The directors that we meet have a view of what their business is capable of, but they feel hamstrung by employment regulations, lease obligations, landlord and tenant relationships, for example.

Using the power of the Insolvency Act and case law, it is possible to restructure the business aggressively and cut costs. Sometimes though we use the “power” or threat of formal actions without any formal appointment. Discussing the options of trading out with a creditor and using the threat of formal insolvency can be a powerful negotiating tactic used carefully.

Of course, the option of cutting costs aggressively informally can lead to large redundancy and lieu of notice liabilities that the cash flow cannot sustain. We often meet directors of older companies where taking out ten jobs could cost £70-£80,000 of cash that isn’t available. Banks will rarely support this type of payment when facilities are close to the max.

Using a CVA makes it possible to reduce staff numbers quickly and with nil cash costs. Likewise, a CVA can determine lease obligations for rent or photocopiers.

Consider this. If the business was to restart today, how many people would be employed in what premises doing what type of work? Using a CVA we can, largely deliver that “shape” of business for the company whilst maximising creditors interests.

To support the plans for restructure companies must get their accounts and forecasting act together. KSA Group can assist with generation of very detailed financial forecasts and due diligence on business plans and we can be used as the external turnaround practitioner to help structure a recovery plan.

The fact that we are also CVA experts and licensed insolvency practitioners can focus the creditors minds on the deal. If a deal cannot be pushed through then the formal remedies of CVA, administration, liquidation are available to be used.

If the business can become profitable despite the need for massive changes and tough cost cutting, then it is worth pursuing this rather than simply admitting defeat and placing the company into liquidation As the owner, MD or board of a struggling company don’t give up until ALL OPTIONS have been carefully explored with expert turnaround advisors.