The document that decides whether the bank stays on board.
If lenders are to continue their support during a crisis, they require evidence: is this company capable of being restructured, and what exactly must happen for it to remain so? This evidence is provided by a restructuring concept in accordance with IDW S 6, the German standard for restructuring concepts issued by the Institute of Public Auditors in Germany. For banks, it is also the basis for ensuring that further loans are not construed as contributing to a delay in filing for insolvency.
We prepare restructuring concepts and Independent Business Reviews, review existing concepts and support implementation. For us, the concept is not a binder on a shelf, but the work plan for the two years that follow.
What you gain
- 1A reliable answer to the core question. Capable of restructuring or not, with reasons, traceable and defensible towards third parties.
- 2A negotiating position towards banks. Without a concept, there is usually no standstill agreement and no new credit line.
- 3Protection for management. A documented assessment of the ability to continue as a going concern is an essential safeguard against the accusation of having acted too late.
- 4A plan of measures that holds. Every measure with an amount, a deadline and an owner, built into the planning, not as a declaration of intent.
- 5A standard that all parties know. IDW S 6 is the common language of banks, insolvency administrators and courts.
Structure in accordance with IDW S 6
The standard sets a fixed framework. A sound restructuring concept contains:
Starting position and stage of crisis. Where does the company stand? The standard distinguishes between stakeholder crisis, strategic crisis, product and sales crisis, earnings crisis and liquidity crisis. This classification is not a formality, it determines which measures can still take effect. Anyone who works on strategy during a liquidity crisis loses.
Company profile. Market and competition, range of services, organisation, economic development in previous years, net assets, results of operations and financial position.
Causes of the crisis. Causes, not symptoms, separated into those for which the company itself is responsible and those that came from outside. Without this separation, it is impossible to explain why things will turn out differently this time.
Target picture of the restructured company. What will the business look like once the restructuring has succeeded? Which business, which structure, which results? This target picture is the benchmark against which the measures are assessed.
Measures. By area (sales, production, purchasing and working capital, personnel, financial management), each with its effect in euros, timing and responsibility.
Integrated planning. Profit and loss, balance sheet and liquidity over the restructuring period, with each measure shown individually. Where required, supplemented by a liquidation calculation and a calculation under an Insolvenzplan (the plan creditors vote on in German insolvency proceedings) as a benchmark.
Overall conclusion. The key statements required by the standard: is the company able to continue as a going concern, and is it capable of sustainable restructuring? Both must be answered with reasons, not merely hinted at.
When things need to move faster
Not every situation requires a full restructuring concept. If banks initially only require an independent assessment of the situation, an Independent Business Review is the right route: shorter, focused on the plausibility of the planning, the development of liquidity and the decisive value drivers.
The IBR is also the usual first format when several banks are involved and first need to agree on a common picture. The full concept often follows later, and the IBR is then not wasted effort, but its foundation.
From engagement to report
A restructuring concept of this kind takes six to ten weeks, depending on the size of the company and the data available. The process:
- 1Clarifying the engagement: who will be interviewed, who the report is addressed to, which questions are to be answered
- 2Data collection: figures, contracts, organisation, interviews with executives
- 3Analysis: causes of the crisis, value drivers, market comparison
- 4Work on measures: together with your team, not at a desk
- 5Planning: integration of the measures into the figures
- 6Report and presentation: including to banks and shareholders
The fourth step is where restructuring concepts differ. Measures formulated by an adviser alone are not implemented. Measures the company has helped to develop are.
