What does it take to turn the business around?

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Directors and owners who have a company in financial crisis or insolvency often spend years trying to turnaround the business. The symptoms are usually debt problems due to ATO debts, credit problems or legal judgements. (Shareholder disputes are also cause of breakdowns and these can be resolved by company restructure, often forced through liquidation.) Often, when trying so hard to turnaround the company, the directors and owners miss the most important question: Is it better to try to turnaround the existing company or restructure, leaving some of the major problems behind? Our Information Page entitled ‘Is it better to fight or find another way?’ is essential reading that sets the issues and important options out clearly.

For example, a planned Liquidation can be used to enhance a business and preserve wealth especially when combined with good turnaround advice – in other words a restructure combined with a better management practices.

In 2007 a one of the best and most thorough studies on business turnaround was conducted in Holland. Its findings were as follows:

On the basis of the case studies of successful reorganisations, the factors that determine the success of a rescue or turnaround are:

  1. Active attitude by management and shareholders with regard to the turnaround;
  2. Involvement of important interested parties (eg financiers) in the reorganisation process;
  3. Adequate and speedy reorganisation of the business operations (preferably with the help of turnaround consultants);
  4. Transparency (towards financiers) with regard to the financial situation and the intended turnaround measures;
  5. Injection of risk-bearing capital (equity), (e.g., via a takeover).

The report goes on to say that “It appears that turnarounds are especially successful when the company is able to reorganise its business operations quickly and adequately and, thereby, to restore profitability. However, this process must often go hand-in-hand with the introduction of additional risk-bearing capital (as noted above, possibly by way of a takeover). In this way, a foundation can be laid for the future since this positively restores the balance-sheet ratios (relation between equity/debt).”

Certainly we agree with all of those findings and our 7 point plan covers them all. But one of the most important things was the introduction of a big bucket of no obligation equity funding. The fact is that a company in financial distress is often not able to attract finance or equity, at least not on anything other than ‘fire sale’ values.

The study did not investigate where such funding was not forthcoming and what alternatives could be available. That is where Triple R presents a unique solution. By combining the usual turnaround management techniques plus finding ways of restructuring the distressed entity, we can save the business and give it a new platform largely free of the former debt burden that weighed it down.

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Remember the Liquidators work for the Creditors, not for you. That’s their job. It costs you nothing to talk to us.

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