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Why a consensual process is vital in a financial restructuring

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This article is Part 4 of a five-part series outlining key steps to assist in a financial restructuring.

To achieve a successful restructuring, all stakeholders must be kept on board and motivated, even when bumps in the road occur. Maintaining this consensual process can require a great deal of diplomacy, negotiation and some challenging conversations. It is vital to establish the right structure for the long term, in order to drive the business forward, and key stakeholders will usually be asked to play a part. For example:

  • A funder may be required to agree to a forbearance or debt write-off.
  • A private equity lender may be required to convert loan notes to equity.
  • The management team or directors may be required to commit to the business for the long term via equity injection or other commitments.

How restructuring advisors maintain a consensual process

As noted in our article on maintaining stakeholder alignment during any restructuring, the directors and management teams will, on a daily basis, remain focused on managing and driving the business forward. In our role as restructuring advisors, we will:

  • Get to know your key stakeholders and understand each of their positions
  • Review the financial position, stress test the forecasts and provide analysis of the proposed restructuring that has been developed to support the business for the future
  • Work alongside management to negotiate the restructuring, keeping all stakeholders on board and contributing
  • Liaise with lawyers to ensure the restructuring is appropriately documented

In short, we provide the independent voice and testing that corporate stakeholders will expect and require. Your management team may be able to contribute somewhat to the restructuring process, but they’re unlikely to be viewed as an independent party. There’s also a very real risk of some stakeholders bringing in their own advisors, which may render the process non-consensual.

Read next: Part 5: Alternatives to financial restructuring

Financial Restructuring Series

Bryan A. Tannenbaum

Partner

Daniel Weisz

Partner

Arif Dhanani

Vice President


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