Middle East and global economies are on a turbulent path to recover from the effects of the pandemic. With the ongoing waves of COVID-19 triggering new lockdowns and closures, businesses continue to experience strong headwinds. As such, short-term interventions and measures can no longer fully cushion the impact of the pandemic. Businesses must be prepared and can no longer rely on government subsidies or the suspension of debt obligations. Nor can they afford to wait for the recovery to run its course.
It is critical that businesses identify pressing issues, evaluate available options, and act proactively and decisively at the right time. For this reason, we see Financial Restructuring as one of the four critical value levers that businesses must pay attention to on the road to recovery. Just like the wheels on a car, these four levers - Operational Restructuring, Cash Optimisation, Financial Restructuring and Strategic M&A Mechanisms all need to be in good working order to move forward.
A business that might be under financial stress is closely watched by investors, concerned suppliers, lenders, regulators and anyone else with a vested interest. Distressed businesses have a window of opportunity to take proactive and decisive action to avoid facing insolvency. These may be corrective actions, such as launching an operational restructuring programme or releasing cash from working capital. And at other times, financial restructuring transactions may be the only answer to draw the line between survival and insolvency.
The majority of times a financial restructuring transaction will work; insolvency can be avoided, and survival ensured. Renegotiating financial arrangements, raising new debt or equity, or selling-off non-core assets or parts of the business can all prove effective, but also need to be handled carefully. A business facing this much turbulence will be under a great deal of scrutiny as it sets its new flight-path, and although all stakeholders, investors, lenders, regulators, etc. should be aligned on its ultimate destination, the different perspectives for how to get there may come into focus. Communication, therefore, will prove critical in these uncertain times.
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Failure to manage stakeholders effectively can hinder business recovery. But if a well-prepared management team stays on its toes and keeps track of all the hurdles the business might face, it can realise the benefits of available Financial Restructuring options and take control of the company’s future.
By taking these five important steps to maintain financial control, and considering our recommendations on Launching an operational restructuring programme, Important steps to protect cash, How to maximise your liquidity, and the Five key questions to consider in conversation with your creditors, organisations will be on their way on the journey to value preservation and, ultimately, value creation.
PwC’s Business Restructuring Services team helps you take action quickly to generate results, drive rapid cost and cash improvements, and help you keep your options open by acting now to recover.
Anthony Manton
Partner, Business Restructuring Services, PwC Middle East
Tel: +971 04 304 3100
Christian Jarjour
Senior Manager, Business Restructuring Services, PwC Middle East
Tel: +971 527 233 364