You are a shareholder of a company in difficulty: the potential options.
Depending on the applicable legal context, what are the shareholder’s options if the investee company finds itself experiencing a liquidity crisis?
If the company is the subject of collective insolvency proceedings, the shareholder’s prerogatives may be constrained by the procedure’s governing bodies. If the company is solvent or the subject of a prevention plan, the shareholder may expect to be consulted and to have to choose between financing restructuring or limiting its exposure with the risk of being obliged to dispose of part or all of the company.
1 – Turnaround with or without the injection of new money:
Two situations may be envisaged:
- The company’s management has identified the measures of restructuring required but needs time to implement them;
- The company’s financial position is worsening but is not yet one of liquidity crisis, its management team is not accustomed to managing this type of difficulty and you need an outside team to support them throughout the process of restructuring.
In both these cases, support is required for the purpose of understanding the company’s financing requirement and explaining it to the company’s financial partners, determining the applicable timing and thereby securing your investment whilst at the same time enabling your own management teams to engage the company’s timely restructuring.
2 – Disposal of part or all of the company:
- Are the sources of losses limited to a single subsidiary (in the case of a group) or activity or are they more pervasive within the structure as a whole?
- You want to dispose of the failing subsidiary or activity, or of the structure as a whole, but within a context where timing is of the essence.
The solutions offered by SO-MG Partners:
Depending on the shareholder’s intentions and on the legal context of the shareholding, a number of scenarios for exiting the crisis may be envisaged. SO-MG Partners can support the shareholders of a company in difficulty for the purpose of evaluating its financing requirement and proposing a sustainable solution in accordance with the requisite timing.
The first step will involve undertaking diagnosis of the company’s difficulties as a means of identifying the drivers for turnaround. Operating and cash forecasts will need to be prepared or fine-tuned (for reliability) in order to calculate the overall financing requirement.
The second step may take either of two different forms of support:
- Operating support for the company’s management teams as they implement the requisite restructuring measures and/or seek out new money; or
- Support for the shareholder in the process of sale of the structure as a whole or of the loss-making subsidiary or activity.