4 Myths About Restructuring Experts

What is the role of a restructuring expert?

To step into a Company that is in crisis, force some layoffs and slash costs? No. No. No.

Restructuring is a word most business owners want to avoid, yet ongoing restructuring processes are central to the success of the world's best companies.

Unfortunately, media coverage has associated restructuring with failure, but if implemented appropriately and before a company gets into trouble, can be a key to long-term success.

Myth 1 - Fancy Plan and Walk Away

Restructuring professionals come up with a fancy plan, take a fee and walk away. Not True.

First of all, qualified restructuring professionals are usually Certified Turnaround Professionals recognized by the ACTP and are members of the Turnaround Management Association.

To achieve this designation they have met the rigorous requirements of education, years of experience in the field, completed exams to confirm their technical knowledge, submitted case studies from successful engagements, passed interviews, a screening process and have had professional references verified.

Secondly, CTPs like to be referred to as resultants versus consultants. Meaning results are achieved as opposed to just being talked about. Walk the walk versus talk the talk.

CTPs have proven operating experience in most aspects of business from finance and accounting to manufacturing and distribution to sales and marketing.

If the company owners and senior management are willing and able to acknowledge the need for unbiased expert advice, an independent restructuring professional is much more likely to drive success.

Owners and Senior Managers understand their industry, employees and their company better than anyone.

Restructuring professionals bring experience and a track record from countless real-world companies, where their solutions have delivered long-term health, growth and profitability.

Collaboration between managers and a restructuring professional delivers fast, effective and long-lasting results.

Restructuring professionals provide the leadership, processes and day-to-day decision-making needed to lead the development and implementation of a restructuring plan.

Myth 2 - Restructuring Always Involves Layoffs

Not true.

Restructuring begins with a thorough understanding of the current processes and utilization of resources (people and assets), including technology. The Restructuring plan will include changes in the business' operational model only in areas that increase the leverage of all of these resources to maximize value for the business enterprise.

Areas in the business model that are consistent and repetitive should be standardized and processed with technology to maximize efficiency.

This frees up time for the existing employees to be more focused on adding value with customers, vendors, and other team members with support and training.

It is true that if the company has failed to operate a lean business model, that layoffs are possible, but that is the decision of the owners and senior managers. It is not the goal of the restructuring professional. Employees are the lifeblood of the company.

Remember.
The most successful entrepreneurs are those constantly looking for ways to improve their Company. Restructuring is a cost-effective and integral part of the process.

Myth 3 - Too Expensive

Not true.

Too expensive is a relative term. Doing nothing may be catastrophic. You could lose your company if you live in denial and ignore financial, operational and strategic problems. Waiting too long to engage a Restructuring Expert will cost you far more in the long run.

Having said that, you should only engage a Restructuring Professional if you feel confident that they will be able to add enterprise value far in excess of what it costs to hire them. If it costs $25,000 to add $250,000 to the bottom line, you got a great deal.

There are going to be many firms starting up as a result of the financial crisis. You should take your time interviewing a restructuring professional. Seek professional references from banks and attorneys who have hired them to help their clients and have them explain how their process could work for your company.

For a successful restructuring process, you want the experience of professionals who have successfully completed many restructuring projects over many years. It is a specialized skill and requires a specialized expert to add real and lasting value.

When you have researched and chosen the best firm for your company, it is time to be clear on what they need to achieve.

Ask your restructuring expert to detail in writing everything that they hope to achieve for your company.

In addition, you may want to carve out some of their fees into performance-related incentives. If you align their pay with your goals, then they will have additional incentives to perform.

Myth 4 - Only a Short-Term Solution

Restructuring is just financial engineering and it will only have short-term effects.

Not true.

Financial Restructuring is only one part of the process. It is, however, critical to the long-term success of your Company.

If your Company has too much leverage or fails to meet the earnings covenants in your Credit Agreement, then the restructuring of your Balance Sheet is required. This involves evaluating all of your Company's Assets, developing and executing a plan of action to increase the Asset turnover ratio and improve your company's liquidity.

Debt must be evaluated with a plan of action to reach a debt level that can be serviced and remain within negotiated covenants. This can involve bringing in equity capital, negotiating haircuts with lenders as well as negotiating deals with vendors to inject capital back into your business.

A quality restructuring of your Balance Sheet will position your company not only to survive, but to thrive for many years to come.

If you want to learn more about how Restructuring Experts could add value to your or your client's Company, please call our office in Tulsa at (918) 392-2900.

All rights reserved. Copyright: ClearRidge Capital, LLC, 2009.

ClearRidge provides Merger & Acquisition, Restructuring and Corporate Finance services advice for midsize companies.

M&A includes buyer and seller representation for companies with $20 million to $500 million in revenues.

Restructuring includes financial, operational, strategic and pre-Sale restructuring.

Corporate Finance includes raising and replacing senior debt, subordinated debt, mezzanine and equity financing.

Bankruptcy and Turnaround services include debtor and creditor advisory, bankruptcy support and turnaround management.

www.ClearRidgeCapital.com