Turnaround | Dirigeants & Investisseurs

Prepare the business for a better come back

How to divest a company in turnaround

Turnaround of a subsidiary

The company faces major difficulties and immediate actions have to be decided and implemented.

Results are falling down dramatically.
The situation is so serious, it needs immediate actions in order to win some time.

D&I will immediately act, directly or indirectly, eventually by mobilizing relevant specialists (conciliators, lawyers specialised in destressed businesses, accounting audit firms, etc.).

D&I will then assist or even manage the company, eventually endorsing the social responsibility, during the full critical period (negotiations with banks, operational steering of the turnaround, etc.).

Prepare the business for a better come back

Priorities are clear and are the following :

To postone the deadline of indebtedness
To transform the company
To rebuild confidence with stakeholders

Once the initial emergency measures have been implemented, D&I will complete a full audit, draft and put together the appropriate action plan. The latter intends to reduce significantly the break-even point without sacrifying any futur potential development. Then, regardless of the operating mode (support to the director or direct control), D&I generally takes over operational responsibility of the business and leads the turnaround in all aspects until success.

How to divest a company in turnaround

Major markets margins have structurally declined without any hope of recovery in medium term. The level of indebtedness is huge and cash position is critical. The only solution is to find a new industrial investor. This would create synergies so to improve the situation. Many options are possible but the company must stay afloat during the needed period.

The aim is to keep the company in bonis. A public class action would have a devastating impact on the value of the company’s business and on the working capital because of unavoidable effects on customers and suppliers.

While taking care of daily emergencies to keep the company alive, D&I concomitantly completes a full audit and builds an exit plan. By doing so, D&I often manages operations directly and all through the period of time required to find a new investor and the associated due diligence days or weeks, including if necessary the transition phase with the new investor.

Case study : an example in the wood and paper industry

Baseline situation

Industrial group, 420M€ of turnover and 2,400 employees
All branches of activity have a very decentralised organisation
Liquidity crisis caused by a sharp deterioration of profitability in an industrial highly capital intensive sector
Lack of confidence from banks with potential negative effects on customers and suppliers
D&I intervention in order to put the industrial group under control and get enough time so to find a long-term solution

Major lines of work

Emergency measures :
- Put cash control and spending commitments under the exclusive company director responsability
- Apply priorities on purchases in order to promote “return on invested cash”
- Postpone non essential investments
- Restore confidence with banks in order to obtain standstills and avoid immediate reimbursements of debts
- Negotiate with the State a delay for the payment of some fiscal and social charges so to dedicate all available cash for the operational needs
- Explain to social partners, main suppliers and customers the implemented measures

Working on core business issues :
- Analyse the strategic positions of each business activities
- Build a turnaround plan for each branch of activity
- Look for new partners in order to support the group’s turnaround
- Renegotiate bank debt and restructure the short term finance facilities/li>
- Put business branches under the control of the Holding

Turnaround of a subsidiary

This subsidiary would face hug difficulties if its mother company was not supporting it. The current situation is far from being sustainable.

D&I establishes a detailed audit of the situation, draws the turnaround plan and identifies conditions of success.

D&I then assists the director in the implementation of the action plan, its operational development, the social negotiations, and even conducts directly its implementation in the absence of the director, until a suitable way out of the current crisis is found.

Case study : an example in the textile industry

Baseline situation

Textile industry, subsidiary of a large worldwide company. This company generates annual sales revenues 8 M€. It hires 90 employees dedicated to industrial design, product manufacturing and distribution in the market of swimwear for women.
These products are marketed exclusively under its own brand name with an upper intermediate marketing positioning.
The mother company wishes to support its subsidiary through its sale to assignees able to assist the subsidiary in its turnaround and its repositioning.

The turnaround plan is based on the following main points

Reflection focused on the offer : questioning current market positioning of products and product ranges (range too broad, low selling price dispersion)
- A decrease of themes between 30 and 40 %
- Launching a product range positioned as “young/sexy/affordable” with a target selling price 30 % below current market price. The aim was clearly to attract new customers.
- Reducing the team of designers and overhauling the creation process which cannot remain solely in the hands of designers. Coordination with marketing, sales and engineering departments is key in order to propose products that better meet customers needs.
Rethinking the distribution modes : which relies only on department stores and independent shops (department stores attract more and more foreign customers that are not looking for lingerie or swimwear and independent distribution is a sector in crisis). The strategy consists in utilizing the strength of the brand and capitalizing on its good visibility on social networks and blogs:
- Implementation of an ecommerce website and dedicated Web marketing tools, much more highlighting the brand, and a revisited product offer. All these elements should create a new momentum of product sales.
- Overhaul the organisation of the supply chain. Emphasis is given to outsourcing in order to reduce costs and adopt the internet model of distribution.
Rethinking the production cycle which is organised around the launch of 2 new collections a year. This organisation is unique to the fashion sector. It leads to structural congestion and constant overstaffing. At the moment many shops focus on how fast they are able to renew product ranges and how skilled they are at showcasing innovative products.
- Calling into question a rigid organisation that remains stuck on collections associated with a 5/6 months discounts period to 2 months maximum period so to create production flexibility, also by subcontracting some tasks.

This plan aimed at create a new momentum and to re-energize the whole business.

Prepare the business for a better come back

Prepare the business for a better come back

How to divest a company in turnaround

How to divest a company in turnaround

Turnaround of a subsidiary

Turnaround of a subsidiary

Prepare the business for a better come back

How to divest a company in turnaround

Case study : an example in the wood and paper industry

Turnaround of a subsidiary

Case study : an example in the textile industry

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