The corporate recovery specialists

The easy availability of debt in years gone by meant ailing companies often confused refinancing with restructuring.

Huron Consulting’s Alain Le Berre tells Patrizia Rossi what it really takes to make a business commercially viable

There is no place to hide for companies running into trouble in this day and age. Alain Le Berre, MD of global giant Huron Consulting Group, doesn’t necessarily think this is a bad thing. After all, responsible business leaders should always be willing to face the facts.

“Between 2004 and 2007, companies were not being restructured, they were simply getting refinanced,” says Le Berre, who earned his stripes at the Close Brothers European Special Situations team in London and the Big Four professional services firm, Ernst & Young.

“Many of those refinancing deals failed to properly address the underlying root causes of those business failures,” he continues. “They failed to provide sustainable restructuring solutions.”

A lot of companies are now paying the price of simply replacing one debt structure with another one. “What happened wasn’t restructuring in the proper sense,” he says. “All those companies were doing was creating a short-term solution to a long-term problem.”

For Le Berre, this is never going to be satisfactory. Instead, if a company is finding itself in an increasingly weakened position, there must be a thorough appraisal of where the problems lie and a pragmatic solution applied. “A bad case of financial restructuring is when a company comes back 18 to 24 months down the line wanting more restructuring advice.”

If the restructuring is done correctly, reasons Le Berre, “your client is not going to come back to you when you seem to be finished”. This approach seems to paying off at Huron, which posted revenue of $615 million for its most recent year-end – it reached number 43 in Fortune magazine’s list of the 100 fastest-growing companies – and it now has over 2,000 employees across the US, Europe, the Middle East and South-East Asia. 

Le Berre says the UK division of the firm has worked with “eight different companies in as many months” in a number of sectors. These include retail, oil and gas, automotive, biotech and financial investment. “All of these companies have turnovers of various sizes, but each one has an international presence,” he comments.

The types of services in this area range from providing strategic planning, company assessments, crisis stabilisation and liquidity management and cash flow forecasting, right through to providing interim managers (CEO, CFO, COO) to bank loan refinancing and cost reduction initiatives. For Le Berre, the key to getting a company back on track is to align both the operational and financial restructuring.

“Typically, operational and financial restructuring projects have different time constraints. So for operational restructuring project, you would need 12 to 24 months before you could start to see the results, whereas the results of a financial restructuring may be required within a matter of months, if not weeks. When both are dealt with separately and you are not sufficiently coordinated, you end up lacking the necessary balance to move the business forward.”

Holistic approach

Le Berre stresses that while it is important to understand a business as a whole entity and not look at it in silos, it’s important to focus on what the main problem is with any particular company. “We will concentrate on one area. Sure, we take an objective view of the entire business, but then we discuss in conjunction with senior management or investors what it is they think we can do for their business.”

If a turnaround or restructuring is to succeed, then key stakeholders will often have to rethink the business’ priorities. This may mean focusing on cash and liquidity as opposed to profit in order to stabilise the organisation. Le Berre says that its consultants also have the experience to know how feasible it is to arrange different types of funding, be that a rights issue for a public company or some form of asset-based lending for a retail concern.

One trend he identifies in the market is a number of private equity firms seeking to invest or reinvest in companies – a sign that just because a company may have lost its way, it doesn’t mean the intrinsic value of the business can’t be rediscovered in the long run. “There is definitely activity among the private equity firms,” he says, noting that inevitably there are also a number of players seeking to purchase the right kind of distressed asset.

As for Huron, Le Berre expects the wide variety of work to continue apace. He gives the examples of working with an international automotive supplier where the firm has conducted an “operational restructuring diagnosis and the following action plan to be implemented”, and elsewhere Huron has assisted creditors of a distressed company by confirming the validity of the management’s “existing restructuring plan”.

What is loud and clear is that for any company that is floundering, regardless of sector or location, the imperative is to recognise the problem. “Don’t assume that you can afford to wait until the next month or the next quarter as chances are the circumstances will be more difficult tomorrow than they are today.”

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