Companies Restructuring Analysis

Prof. Dr. Dan Dumitru Popescu

Main issues
A. Corporate Restructuring of State-Owned-Companies

1. 2. 3. 4. 5.
B.

Commercial Viability through Managed Change Enterprise Level Restructuring Institutional Level Restructuring Cost-Effective Restructuring What Lies Ahead

General Components of Restructuring for Private Companies

A. Corporate Restructuring of State-Owned Companies

The objectives of large scale corporate restructuring:

Restructure viable corporations Liquidate non-viable ones Restore the health of the financial sector Create the conditions for long term economic growth

The main government-led corporate restructuring tools:

Mediation Incentive schemes Bank recapitalization Asset management companies The appointment of directors to lead the restructuring

A. Corporate Restructuring of State-Owned Companies

Laying the foundation

Overall economic stability (prices, interest rates, exchange rates) Assess whether the problems are systemic A comprehensive restructuring strategy

A supportive legal, regulatory and accounting environment

Improved governance by using international standards

Closing non viable corporations will incur social costs, so government actions will be needed

A. Corporate Restructuring of State-Owned Companies

Restructuring the Financial Sector

Restructuring the Corporate Sector Choosing the form of Government Involvement Government mediation Government-financed Incentive Schemes

Recapitalizing Banks
Asset Management Corporation A Restructuring Director Reducing the Role of the Government

A.1 Commercial Viability through Managed Change

Definition: Restructuring a commercial activity implies change change in the way a company creates value and delivers that value in the form of goods or services to a marketplace.

the long term commercial viability of an enterprise is dependent on the ability of management to implement the changes needed to optimize its strengths and minimizes its weaknesses.
Efficiency-Based Restructuring

any actions are justified on a cost-benefit basis a well defined plan of actions a critical path short-term and long-term priorities identified

A.1 Commercial Viability through Managed Change

A.2 Enterprise Level Restructuring

Identifying the achievable and taking charge Techniques for quick assessment and momentum building

A.2 Enterprise Level Restructuring

A.3 Institutional Level Restructuring

A.3 Institutional Level Restructuring

The basic approach to "Efficiency-Based Restructuring" involves the following:

Choosing the right approach for restructuring profile of the enterprise (s) to be restructured, the particular industrial or agricultural sector involved, as well as the capabilities of the entity overseeing the project scope of program and resources available general environment within which the project is being conducted

Pre-Privatization vs. Post-Privatization Restructuring

A.3 Institutional Level Restructuring

Unique Approach to the Restructuring Process:

A.

Establish a Special Designed Delivery System

Short-term action plans Conciliation agreements Financial restructuring plans

B.

Establish a Partnership for Privatization with the enterprise through Cooperative Agreements Establish Strategic Alliances with other entities

C.

A.3 Institutional Level Restructuring

A.3 Institutional Level Restructuring

Stage 1 The Triage process

Stage 2

an in-depth evaluation of the operations and finances an in-depth Due Diligence prior to privatization Short-term Actions Comprehensive Restructuring Plan identify potential for rationalizing industrial sectors through mergers and spin-offs special technical assistance programs special purpose valuations
Environment valuation Re-deployment valuation Debt valuation

Stage 3

Stage 4

Post-Restructuring Assistance Requirements

A.3 Institutional Level Restructuring

A.4 Cost-Effective Restructuring

Cost-Effective Restructuring

Triaging of the Portfolio Fast-Tracking any quickly privatizable enterprises Risk-Mapping the operational landscape Short-Term Action Plans (STAPs) Sector Restructuring vs. Enterprise by Enterprise Generic Models for rapid deployment

A.4 Cost-Effective Restructuring

A.5 What Lays Ahead

Critical Monitoring and Follow-up Support

Other Critical Success Factors, such as:

Focus on external issues Distribution system Energy availability and cost Labor mobility Modern pollution standards Corporate governance issues Decision Support Systems within the enterprise Access to reasonably priced capital Special skills and services

A.5 What Lays Ahead

Issues related to successful economic reform:

I.

Management of the Process

II.

Measurement of Success
Demonstration-Effect

III.

General Components of Restructuring

Operational Restructuring

Production Enhancements / Improved Productivity

Energy Conservation Improved Span/Throughput

Crisis Management Programs

Asset Stripping
Inventory Reduction Freeze on Capital Investments

Short-Term Action Plans

Management and Control
Cost Containment Supplier terms Improved Commercial Terms

General Components of Restructuring

Debt Restructuring

ST Debt Conversion to LT Debt Conversion of Debt to Equity Debt Consolidation

Corporate Restructuring

SBUs / Cost Accounting Mergers and Right-Sizing

Checklist for Preliminary Company Analysis

The Company (Question everything!)

How large is the market? Competitive advantage What is the Business Model?

Who is managing the show? (CEO or CFO?)

Who really wants the company to succeed and who does not? SOFT Assets:
Employee turnover Educational level Training level

Innovative capacity
Strategy for specific market goals

Overview of current Company Status and Description of the Business

Essential

Elements of the Business

Legal status, reputation, operations, production, technology, administration, accounting & control, regulation & licenses, sales & marketing

Market and Industry Management and Organization, Key Personnel

Business

Plan Financial Analysis Special Issues Risk Assessment

Case study Romanian Privatization