Restructuring — the supreme discipline in corporate management

In the indus­try (of restruc­tu­ring consul­tants), a signi­fi­cant increase in the number of cases is alre­ady appa­rent. This trend will conti­nue to streng­then in the second half of the year and in 2013 due to the econo­mic situa­tion. In contrast to the “broken LBOs,” the current cases are almost inva­ria­bly charac­te­ri­zed by a stra­te­gic or opera­tio­nal defect. Ther­e­fore, pure finan­cial restruc­tu­ring is usually not enough; these situa­tions some­ti­mes require signi­fi­cant cuts in terms of stra­tegy, manage­ment, owner­ship struc­ture and corpo­rate gover­nance. Special topics are “Real Estate” and “Ship­ping”, which are now being addres­sed much more aggres­si­vely by the banks concer­ned. In the medium term, we ther­e­fore expect signi­fi­cant growth in the restruc­tu­ring market and further incre­asing inte­rest in German assets from inter­na­tio­nally active distres­sed funds.

If, in the course of a restruc­tu­ring, the share­hol­der is unable to fulfill his func­tion, in parti­cu­lar the provi­sion of risk capi­tal, the credi­tors often demand a change in the exer­cise of the control func­tions. This is usually accom­pa­nied by the relin­quish­ment of poten­tial econo­mic bene­fits if equity returns to value. Clas­si­cally, banks require the appoint­ment of a trus­tee who assu­mes the share­hol­der role in what is usually a dual-purpose trust and mana­ges the liqui­da­tion of the business.

We also see an incre­asing willing­ness on the part of German banks to follow the Anglo-Saxon model and assume the role of share­hol­der on their own respon­si­bi­lity or in synthe­tic struc­tures within the frame­work of a debt2equity swap or simi­lar, also synthe­tic struc­tures. The concrete design depends stron­gly on the indi­vi­dual condi­ti­ons and is possi­ble in many varia­ti­ons. We have been instru­men­tal in deve­lo­ping and imple­men­ting these struc­tures with various houses.

Leading the manage­ment team and repla­cing or streng­thening the team when neces­sary is key to the success of any restruc­tu­ring effort. Provi­ded that the company crisis is not only due to market factors but also to manage­ment fail­ures, the exis­ting team often leaves the ‘goat the garde­ner’. Nevert­hel­ess, it is often not possi­ble to replace the old manage­ment for a variety of reasons. Ther­e­fore, leader­ship and control from the super­vi­sory bodies and/or from an opera­tio­nal manage­ment role is an abso­lute prere­qui­site for success. For this reason, we gene­rally recom­mend that finan­cial restruc­tu­ring be linked to appro­pria­tely adapted corpo­rate gover­nance and we also play this role in the corpo­rate bodies.