Business Turnaround / Reorganization

To resolve the management issues faced by companies, we provide effective solutions and long-term support based on trusting relationships to assist in the implementation of business turnaround and management reform.

Against a backdrop of intensifying global competition and an increasingly complex and uncertain business environment, there are cases in which companies are unable to appropriately respond to changes and risks, resulting in sluggish business performance or shortage of funds. To avoid such circumstances, companies need to identify the essential challenges they face and take appropriate steps at the right time. However, due to an insufficiency of resources and know-how (due to shortfall of experience), it is also a fact that companies in the midst of struggling alone are not able to take the required actions quickly enough, leading to unsatisfactory results.

Since 1999 (when our focus on business turnaround projects began), PwC has provided support to many companies in the frontline of this arena. The types, sizes, and challenges of the companies that we have supported so far are wide-ranging, which enables us to provide services backed by our experience in the various phases of management reforms that companies face. Professionals with a wealth of experience and expertise provide appropriate support to companies in the transition and regrowth phases of their business, as well as companies facing deteriorating business conditions, excessive obligations and financial difficulties.

Revitalization / reorganization of overseas subsidiaries

Based on the PwC network’s knowledge and experience, consisting of more than 284,000 staff in 155 countries around the world, we can advise on overseas business plan development, performance improvement of existing overseas businesses, and simplification and M&A of overseas businesses.

For many companies, the development of overseas markets is the cornerstone of their growth strategy, and acquisitions of overseas companies and the establishment of JVs with local players are becoming more common. On the other hand, many companies struggle to manage their overseas operations due to differences in culture and business practices. In recent years, there have been cases where massive losses incurred by overseas subsidiaries led to a management crisis, affecting the entire group. Often, the reason behind such losses is weakness in the governance and management of overseas subsidiaries. Due to major changes in the political, economic, and technological fields around the world, uncertainty surrounding businesses is increasing and reconsideration of the governance and management of overseas subsidiaries is more vital than ever before.

Performance improvement of underperforming overseas subsidiaries

<Examples of consultation>

  • Our overseas subsidiaries have continuously generated losses. It appears that various measures had already been taken locally, but their performance has not improved. The financial institutions are also skeptical about our ability to turn the situation around and if this situation continues, we may face difficulties in cash flow management.
  • Our overseas subsidiary is underperforming. Its management has explained the reasons for the underperformance, but not clearly enough. The business management and governance of the subsidiary are weak and unclear, and thus some kind of action is necessary.

<Details of our support>

  • Understanding of overall management conditions and identifying the real management issues (clarifying the true causes of losses)
  • Clarifying the direction of management improvement in order to improve business performance
  • Consensus-building among stakeholders (e.g., key business partners, management and employees, financial institutions, major shareholders) regarding the direction of management improvement
  • Supporting the implementation of improvement measures involving local members
  • Establishment of a system enhancing business management to stabilize business performance

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Reorganizing overseas JVs

<Example of consultation>

  • Although we started a JV with a local company, its business performance has been well below the original business plan. We would like to consider our future direction, but since the management of the JV has been fully delegated to the JV partner we do not really know the actual business conditions of the JV. As a result, we are unable to make any management decisions.

<Details of our support>

  • Confirmation of the actual status of the target business and identification of issues
  • Reevaluation of the future potential of the JV and redefinition of its objectives
  • Clarification of future JV policies, including capital reorganization and withdrawal, and support in negotiations
  • Drafting and implementing profit improvement plans in the event of the JV continuing

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Accelerated simplification or reorganization of overseas subsidiaries

<Example of consultation>

  • One of our overseas subsidiaries, which was established more than 10 years ago, has been continuously generating losses. The initial objective of establishing this entity has already been achieved and we are considering withdrawal. We would like to have expert advice on employee issues, estimation of withdrawal losses, tax issues, etc.

<Details of our support>

  • Scenario analysis of continuation vs. discontinuation (pros & cons)
  • Support for a feasibility study and implementation of a disposal (or sale of the equity) of the business
  • Discussion of exit process and estimation of financial and tax impacts
  • Support for implementation (including support for negotiations with the authorities)

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Debt-capital advisory regarding project finance

<Example of consultation>

  • We have been participating in an overseas resource infrastructure project as a lender, but there is a serious delay in the construction of the plant and it is expected that the repayment schedule will not be met. It is necessary to take actions including modification of repayment terms & conditions and additional equity investments by shareholders. However, difficulties arise from both the lenders – which include many global financial institutions, representing both private-sector and government-affiliated financial institutions – and from shareholders, who are not straightforward to deal with. As we will inevitably face difficulties in the negotiations, we would like to appoint a reliable FA with sufficient global experience to support us.

<Details of our support>

  • Verification and analysis of business plans and cash flow forecasts
  • Consideration of financing and capital-raising options
  • Preparation of explanatory materials for stakeholders
  • Support for coordination and negotiations among stakeholders
  • Advice on term sheets (in collaboration with a law firm) etc.

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Business turnaround / reorganization for large enterprises

Since our business turnaround practice began, PwC has been involved in the turnaround and reorganization of many large Japanese companies. Through this wealth of experience, we are familiar with what happens next and what kinds of preparation and response will be required in the various phases of business turnaround projects.

Against the backdrop of intensifying global competition and changes in the domestic and international economic environment, it has become difficult even for large companies to continue stable management. In particular, in the case of reorganizing a business through a business selection and concentration strategy to achieve sustainable growth, gaining the consent of various stakeholders is critical. However, it is not easy to promote consensus-building amid the presence of complex interests among stakeholders.

PwC supports the turnaround and reorganization of large companies by leveraging our years of experience and know-how based on our extensive business credentials.

Examination of the medium-term business strategy / growth strategy

The business environment surrounding companies is changing day by day, with intensifying global competition and the effect of political changes, making it difficult to maintain competitive advantages for a long period of time. However, because of this environment, it is necessary to carefully analyze the changes that may occur in the future and to discuss in depth the direction the company should aim for.

We will work with our global bases around the world to support the formulation of future strategies and business model reforms, leveraging our understanding of changes in the global business environment and deep experience of scenario-planning techniques.

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Business plan formulation and execution support

In order to steadily implement the plan, the plan needs to be effective and highly feasible. In particular, the feasibility of a plan is important in terms of obtaining the consent of various stakeholders (e.g., shareholders, financial institutions, investors) during the turnaround / reorganization phase. It is also necessary not only to formulate plans but to implement them appropriately.

PwC supports the development of feasible business plans and provides support for the steady implementation of those plans, through the development of appropriate monitoring systems and the provision of necessary resources.

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Improving the profitability of underperforming businesses

There are many cases in which companies with multiple business domains / subsidiaries face difficulties in handling underperforming businesses. On the other hand, the environment surrounding companies is becoming more severe, as seen in shrinking domestic markets and intensifying global competition. Therefore, it is important to improve underperforming businesses and increase their capacity to reinvest in growth fields.

PwC provides support for the realization of profitability improvement by quickly conducting objective business analysis and grasping the financial conditions of underperforming businesses, identifying the factors that are causing the difficulties.

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Business reorganization of the corporate group

During the turnaround phase, there are many cases in which financial and business support from sponsors is required, including business reorganization and restructuring endeavors such as enhancement of profitability through reorganization of the corporate group. PwC professionals who are familiar with the special nature of M&A in the turnaround phase will provide consistent support, ranging from business segmentation based on evaluations of business potential and formulation of reorganization schemes to selection of sponsors and negotiation support.

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Equity / debt restructuring

In a corporate turnaround, it is necessary not only to formulate effective business strategies and carry out sound business plans, but also to restructure capital and debt to secure appropriate financial capacity. Especially in the case of undercapitalization and/or excessive debt, it is difficult to achieve regrowth even if the company has the elements required for corporate management in place, such as strategy, technology and brand.

Through many years of providing business turnaround support to clients, PwC has accumulated experience in equity and debt restructuring and therefore can provide the support you need, including coordination with financial institutions, investment from investors and implementation of an M&A.

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Turnarounds of businesses classed as medium-sized companies or SMEs

The global economy is changing dramatically, and the domestic market will inevitably shrink in the future. In order to cope with the needs of their global business partners, medium-sized companies / SMEs need to expand their overseas operations, as well as seek to expand into new business areas so as to respond to the shrinking domestic market. However, many companies cannot foresee future turnaround and regrowth strategies due to a shortfall of human resources, a lack of know-how and business succession issues.

PwC provides a wide range of services to medium-sized companies and SMEs, including support for overseas expansion, streamlining domestic operations and consideration of new businesses, along with providing human resources and know-how, as necessary.

Support for implementation of business plans

In addition to formulating business plans, we will support the construction of a framework that ensures the implementation of these plans. Especially for medium-sized companies and SMEs, there are cases in which analysis of the business environment has not been conducted sufficiently and/or cases in which the process of formulating plans has not been appropriately established in the first place.

PwC utilizes our accumulated experience and abundant networks to quickly analyze the business environment surrounding the company and to support the creation of a mechanism for the formulation of feasible plans and implementation of those plans.

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Hands-on human resources support

With the decreasing birthrate, aging society and the decline in the working population, it is becoming increasingly difficult to acquire human resources. It is particularly difficult for medium-sized businesses / SMEs to acquire management and global talent, as the demand for such personnel is also increasing among large corporations.

PwC provides hands-on support to implement and manage M&As, such as allocating required corporate planning / financial experts / personnel to work together on site with medium-sized companies / SMEs in order to execute overseas expansions.

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M&A support and financial advisory services for business turnaround and reorganization

The purpose of business reorganization and restructuring is to achieve an optimal portfolio of management resources tailored to each stage of the company’s lifecycle to improve profitability and enhance corporate value. It should be considered an important management strategy, not only when an improvement in the company’s financial position is urgently required, but also when pursuing corporate growth.

In addition, real estate properties, which always need to be carefully considered during business reorganization / restructuring projects, are also sources of corporate value. Especially during the turnaround phase, the value of collaterals and/or the realizable value tend to be highlighted. Going forward, real estate strategies that lead to increased corporate value will be required.

PwC professionals with advanced expertise provide one-stop support for M&As, from the formulation of reorganization schemes through to advisory and negotiation support for sellers and buyers and to due diligence. In real estate-related services, we provide a wide range of support, from strategies for effective utilization of real estate and the appraisal of properties to transaction support for disposals and acquisitions.

Support for business reorganization and restructuring

A successful M&A in business reorganization and restructuring requires the selection of appropriate candidates and prompt execution of transactions. The PwC business reorganization team has a wealth of experience in selecting sponsors, providing M&A advisory services (FA) and executing various due diligence services, including for both domestic and overseas deals. Therefore, we can provide the necessary support for the selection of optimal sponsors and smooth execution of transactions.

(Examples of support themes)

  • Listing potential buyers and sellers (creating long lists and short lists)
  • Financial advisory services
  • Lead advisory for buyers and sellers
  • Financial / tax / business due diligence, formulation / verification of business plans, valuation
  • Structuring advice on sales and acquisitions
  • M&A negotiation support and advice on term sheets and M&A contracts (e.g., SPA, SHA) from the financial viewpoint
  • Preparation / verification of carve-out financial statements and support for disposals and acquisitions

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Support for consensus-building among stakeholders

M&A is a very important decision-making issue in corporate activities, and in order to achieve appropriate corporate governance, management needs to fulfill its accountability to the board of directors, shareholders, and financial institutions. PwC has many professionals with a wealth of experience building consensus among various stakeholders, which enables us to provide highly effective support for the execution of potential deals.

(Examples of support themes)

  • Explanation to the board of directors and various stakeholders and support for consensus-building
  • Support for the preparation of explanatory materials

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Real estate-related business

Our experienced professionals provide high-quality services from the perspective of total optimization for the various property-related challenges, associated with business reorganization and M&A.

(Examples of support themes)

  • Transactions
  • Disposal support (financial impact simulation, buyer search, bid process organizing, closing support)
  • Acquisition support (search and screening of properties, structuring advice, acquisition negotiation support, closing support)
  • Consulting services related to properties
  • Support for the formulation of real estate strategies, advisory services on optimization of property locations and advisory services on real estate investments
  • Investigation and evaluation
  • Real estate market research and appraisal

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Our Team

Kiwamu Sugimoto

Partner, PwC Advisory LLC

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Yasufumi Nomura

Partner, PwC Advisory LLC

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Michio Ikeda

Director, PwC Advisory LLC

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Ryoji Saito

Partner, PwC Advisory LLC

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Business Turnaround / Reorganization

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