Corporate Restructuring
Global Fall Outs, Local Shake Outs
From a world-class debacle like Enron and the demise of some household names in corporate America, to the shake-outs at some of Singapore's better-known corporations...
...these events spell one thing clearly:
CHANGE
And yet, present times also afford an excellent occasion for corporate to spot opportunities to create value and get ahead of the competition. And it's the business acumen and technical skills of key employees that will spearhead such efforts to satisfy the demands of stakeholders, create shareholder value, keep customers satisfied and employees motivated.
What better time than now to invest toward harnessing and sharpening those skills.
Access to capital has been greatly restricted for corporates that consistently destroy shareholder value. It is in this current environment where corporates will, more than ever, be required to seek out new strategies as alternatives to conventional approaches to their businesses in order to attract new capital, remain competitive and effectively re-position themselves for the challenges ahead.
Where industries may have earlier attracted competition from new entrants and established players alike, the maturing of that industry will mean an eventual but imperative exit for marginal players. As the entire industry becomes unattractive, key players will also make concerted efforts to re-focus or re-design businesses to yield higher returns on capital.
Selling core businesses at times appears drastic but can lead to the freeing-up of substantial capital for re-investment into other core businesses or other more attractive high-growth businesses. Alternatively, non-core businesses which are still highly profitable may prove more valuable to consolidators who can take out cost. Hence the opportunities for divestments and acquisitions which may arise from Corporate Restructuring exercises.
But first, corporates that have suffered significant damage to liquidity and loss in earnings may require intensive care in the approach to “upright the vessel”, so to speak. This may entail debt restructuring / rescheduling and or re-capitalisation through negotiations with financiers / investors, and presentation of a viable restructuring of the company moving forward. In such an instance of Corporate Restructuring, one requires (See Figure 2) :
Figure 2 : Uprighting the vessel in distress ã1998-2005 TMA. All rights reserved. A grasp of the Restructuring Objectives, complying with the desires (and often competing interests) of shareholders, financiers, employees and customers alike;
Review / Formulation of the company’s competitive strategies, and the key issues that will have to be addressed moving forward, including but not limited to its targeted optimal capital structure and credit standing;
Review of the credit rating of the company, its ability to raise funds, and cost of funding;
Review and formulation of the key value drivers of the company;
An assessment of the company’s position in its overall industry, industry growth & dynamics, and the company’s internal make-up by way of management, financial reporting and company structure;
Formulating the strategy moving forward for Measuring and Managing value creation through tracking Customers Satisfaction, Shareholders’ Value and Employee Welfare.
In either case, asset disposal of non-core businesses will have to be considered. The competitive strategy to adopt may also include positioning with a value-added strategic partner. This means establishing a relationship that will provide the combination of the business design, local market knowledge and global skills. A strategic partner may also present an opportunity for recapitalisation of the company, which may lead to increased liquidity to focus and expand on value creating opportunities.
Through research and development efforts, we have also developed the Value Seek Analyser (“VSA”), a set of tools which quickly afford us an overview of a corporate’s value drivers and performance. VSA benchmarks corporate performance and surfaces value creation opportunities.
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