Comprehensive solutions to value creation in distressed situations
How can we help?
Our distressed solutions help our clients to sustain and create value in financially distressed situations through operative improvements and balance sheet restructuring. Our services help the companies facing challenges to access new capital, renegotiate existing loans, or regain the trust between stakeholders, in situations where the business outlook and prospects have been questioned. Our leading restructuring experts help the companies and their stakeholders to stabilize the situation, evaluate the feasible and acceptable strategic alternatives and assist to implement the chosen roadmap and initiatives.
Our experience from distressed situations have shown that, the sooner we are involved in the situation, the higher likelihood is for a successful turnaround as the right type measures are considered already in the beginning of the process.
Typical examples of situations where we can help you:
- Voluntary business and capital structure reorganizations
- Financial advisory relating to in-court restructurings (company, administrator, or creditors)
- Option analysis (future prospects, downsizing, closures)
- Operative improvement measures (diagnostics, planning, execution, and monitoring)
- Distressed M&A and ownership changes
Regaining the trust in distressed situations requires a solid understanding of operative root causes behind financial difficulties, comprehensive recovery plan and a right type of stakeholder management in every stage of the process. We can be introduced to the new restructuring situations by the different stakeholders, and therefore our services are always tailormade to respond to the situation at hand.
References
Financial and capital structure advisory for Stockmann Plc. 2020-2021
We acted as the lead financial and capital structure advisor for the administrator of Stockmann Plc. As a result of the in-court restructuring €740m were successfully restructured in record time with the unanimous support from the company’s creditors and owners.
Recovery programme for one of the largest construction companies in Finland 2019-2020
We assisted company's management, owners and financiers to establish a shared understanding of the root causes behind the weak profitability development in connection with leveraged balance sheet and chosen strategy. Our support enabled the new CEO and management team to create an internal recovery programme to respond and mitigate the foreseeable challenges, and to create a solid monitoring and reporting framework for the wider stakeholder group.
Causes of corporate distress
- Typical root causes for industry- and corporate specific financial difficulties
- Typical symptoms resulting from corporate distress
- Common external signs of corporate distress
Typical root causes for industry- and corporate specific financial difficulties
- Rapid changes in market structure and demand
- Strong competition and new competing service/product offerings
- Relatively high cost structure and changes in market position
- Adverse movements in external costs
- Major contracts, cost overruns, lack of financial control and reporting
- Missing the value creation plan for an acquisition
Typical symptoms resulting from corporate distress
- Managements and Board of Directors visibility on the overall strategy and critical factors behind competitive advantage decreases
- Availability of financing is taking greater role in decision making and internal discussions
- Necessary investments are postponed, or new investment are funded by short-term facilities
- Increasing financial expenses are starting to have a negative impact on strategy and optimal capital structure
- Complexity and time spend on stakeholder management increases
Common external signs of corporate distress
- Growth of the business has remarkably slowed down or even turned negative
- Operating profit is marginal and ability to create positive cash flow is poor
- Cost of capital exceeds the historical yield of the delivered projects
- Net interest-bearing debt-to-EBITDA is 4x or above
- Average interest of the loans and credit facilities is 4 percent p.a. or above
Our restructuring framework
1. Diagnostics (‘as is’ -situation and alternatives)
- Business and financial analysis and capital structure assessment
- Strategic and capital structure alternatives and feasibility
- Operative improvement potential identification, evaluation and prioritization
2. Planning and bankable business plan
- Business plan development and respective financial forecasts
- Future debt service capacity and required capital structure modifications
- Internal and external stakeholder management
- Financial structuring and covenant / terms reset
3. Action plan, implementation, and monitoring
- Project management organization and governance structure
- Detailed planning, defined workstreams and key employee engagement
- Business plan and workstream monitoring and reporting
Why PwC?
Success in restructuring situations requires a vast set of skills, capabilities and tools from understanding rationales behind the strategy and competitive advantage all the way to the problems underpinning the balance sheet. Therefore, we always combine our industry experts from strategy, commercial, financial, restructuring situations for a single case team which will provide the best possible outcome for your situation. Our restructuring case team leaders always have more than 10-year experience from a large variety of distressed situations in Finland and abroad, and have good relationships with local banks and other financiers.
Our domestic and foreign network of experts ensures that we are able to bring full service offering to almost every situation. Our tax and legal services can be easily connected as a part of the overall business recovery value creation, and distressed M&A transactions can be managed efficiently with our due diligence and corporate finance colleagues to save your valuable time and money.
