Business Rescue with Turnaround - Managing Expectations
This is serious, as serious as a heart attack! and we take it
seriously. We approach Business Rescue planning as if the business were
our own. Our base plan requires a set of skills that demand a
lot of one single individual, Finance, Strategy, LEAN Process, Change
Management, Project Management, Critical Thinking, Effective
Presentation and Communication, and this needs to be embodied in
someone with Tact, Patience, Abundant Energy and Humor.
Business Rescue - What to Expect
We hit the ground running. Part of the preparation is intense stakeholder management, principally
with Creditors. This adds a lot of value, and the alignment and
expectation management, and simply giving them a sense of comfort and
including them in the process is absolutely essential. The rationale
behind this follows in the next few bullet points below. So before we
take you through the business rescue process and part of our business rescue
plan there are crucial points you MUST deal with now. Obviously time is
an issue, which is short, (the court has the mandate to extend if approached
properly), however you must think about potential flaws in the process
and how a very sub-optimal situation can arise. Consider the following:
- Your Creditors are the final arbiters of your business
- Creditors may have voting rights but where there are
decision makers there are always gate-keepers and influencers. Crude
your Personal Assistant is a gatekeeper, the nagging child in the back
seat of the car, an influencer.
- The Legal Team is comprised of members of a single Practice
typically comprising Insolvency, Restructuring, Business Rescue and
sometimes Dispute Resolution
- They will advise the distressed business on how to file for
business rescue (they can also advise an affected party).
- They must advise on the duties of all the parties involved
in the process.
- They must advise on various liabilities that different
parties may or may not be subject to.
- They will have an opinion and recommendation on which
Rescue Practitioner to Appoint. (This might appear self-serving, but I
would work with the Business Rescue Practitioner first: lower
control, better rescue plan)
- They will claim (although this is not necessarily part of
their mandate or skill set - there are some great exceptions to
this) that they can advise on the proposed rescue plan viability and
any associated strategy.
- This translates into - they advise Creditors on whether to
support/adopt the plan or not.
- But remember the purpose of the Business Rescue is to
increase the chances of the business continuing as a going concern, implicitly
the Creditors are better off as a result of this, based on a risk adjusted Net
- Or so the theory goes and this thinking belongs in the
domain of economic
theory which embraced
rational agents of utility (and is largely
our Blog or Read this HBR article) as it never
considered decision modifiers that
Behavioral Economics now appreciates.
- Throw into the mix the following contributors to variance, noise and disagreement:
- Information Asymmetries - nobody can be sure in this
negotiation of what intrinsic and extrinsic motivators the Creditor is
subject to (create the weirdest scenario you can behind a
Creditors illogical decision and I can assure you real-life will have concocted something
- Differences in Valuation techniques - driven by
the different Discount Rates and WACCs (if you do it properly)
- Expected Value calculation E(X)
= x1p1 + x2p2 + x3p3 + . . .
is a Discrete Value with the
of actually materializing
- Not to mention the cognitive bias and different skills
the table (some of the loud voices at the table will not admit how
little they know about Balance Sheets, Income Statements and Finance
in general, none of us will admit how tenuous our grasp of probability
is (but they will after a great experiential learning exercise I do!)
- Thus we have Statistics with subjective probability
valuations with inconsistent approaches and divergent assumptions! What
a recipe for discombobulation - Nobody can argue that this is an
objective and logical process.
- So we must recognize that this process has strong
political and negotiation elements to it - and prepare for this.
- We are all entitled to our own opinion, but not our own
plan allows for a far more objective discussion to be had and is
appropriately robust and comprehensive considering the impact on
- Lastly, this plan will allow for the additional option of finding Angel investors or those who target distressed debt ie alternative funding sources, if this becomes a problem.
Straight Talk concerning the Rescue Process
The Business Rescue process is not a
pleasant time for the business leadership and
even less so for employees who may be far less financially secure. It
is fertile ground for recrimination, voicing of resentment, toxic
politics, and self-serving behavior. This is at a time when the
business can least afford it. Productivity drops, talent flees, all
sorts of horrible things can happen. But, it can be the chapter of a
new beginning, and the crisis turned into an opportunity for talent to
shine, and for great leadership to emerge. In many instances Managing
Directors are removed from the business, this is often ill-advised. A
partnership formed between the business leadership and the Business
Rescue Practitioner can be really powerful. Our preference is for the
managing director and leadership to remain and to join us on this
challenge and then to take over and earn recognition for the result
down the line. Obviously this is idealistic, but there is nothing wrong
with trying and if it does not work then to consider different options.
At least the leadership should realize that there is recognition that
running a business is a tough job, and if you push the boundaries and
run where others walk or just sit and watch, then expect a fall,
there's no shame in that!