The Relevance of Restructuring
Global markets have been challenging during the past few years, creating significant obstacles for many businesses. This environment has led to a rise in the restructuring of companies before or during insolvency.
Restructuring has become a specialist discipline for the FRTG Group and the advice we provide is not limited to individual industries. The key is to work closely with clients and insolvency administrators.
The overall relationship between the client and the management is important to optimise results and procedures, while digitisation in all areas will speed up this trend even more.
The modern form of restructuring businesses in Germany is to take advantage of the opportunities emerging through the protective shield of ESUG. In the case of imminent insolvency under self-administration, the company is able to implement a financial recovery plan accompanied by a so-called ‘Sachwalter’ (meaning a trustee) who has limited authority over the company.
The company is able to act on its own authority in line with the Sachwalter. Once the company is unable to pay its liabilities or is over-indebted, there is a time frame of 21 days to initiate insolvency proceedings. If that deadline is not met, all participants can be held accountable for the delay in filing for insolvency.
The closer the deadline comes, the more complicated the structured preparation of the filing process. The Sachwalter or the restructuring management represents the interests of advisory and supervisory boards as well as those of the creditors. The client is usually hesitant to enter the ESUG-procedures because of the fear of insolvency, so the goal of the consultant is, therefore, to convince the client that restructuring a business to become competitive again is not the end of a company but can be the beginning of a major overhaul leading to more profit and long-lasting changes.
Over the past two years, we have worked with many clients in the field of medical care. Several hospitals and clinics have been restructured in cooperation with insolvency administrators and other business consultants. Hospitals are facing financial troubles and illiquidity and we are working on market consolidation in this field since it is obvious that the market is leaning towards greater units instead of smaller clinics.
Hospitals showing high deficits will be forced from the market and the need for restructuring services is and will be higher than ever. The costs for the hospitals will increase as much as the requirements, and we expect the market to adjust to the politically motivated changes within ten years. We, therefore, will see more insolvencies and merging transactions in the field of medical care over the next years.
Another industry undergoing a lot of restructuring is the automotive sector. In terms of turnover this market is Germany‘s largest industrial sector but now faces extensive changes due to the diesel scandal, electric mobility, international tensions and economic fluctuations. The automotive market has also shown in the past that even the smallest market changes or market insecurities can have a tremendous impact on the profit situation of suppliers along the entire value chain. Suppliers are the automotive industries ‘workbench’ and do not achieve enough margins to fully react to market changes and therefore declining revenues. We have accompanied a lot of those companies, either automotive groups or suppliers, through restructuring measures as well as insolvency proceedings.
This article is part of the IR Global Meet the Members Guide – Germany. To read the full publication, please click HERE