BIC Behrendt International Consulting

Restructuring in the Recession

Triggered by the collapse of the financial markets in 2008, Turkish companies started to feel the effects of liquidity and credit shortages, and of the worldwide recession, in the 4th quarter of 2008. Since the summer of 2009, the economy improved, but the progress was slow, too slow for some companies. Some companies are in distress, some are in danger of collapsing, and, considering the slow and volatile recovery process, , even the currently healthy companies should be prepared for, in worst case, further worsening economic conditions.

Unfortunately, there is no simple standard recipe for countering these economic problems, since both the effects on individual companies, and the measures to be taken for protecting against it, are different from company to company. In every case, a combination of measures is needed to turn the distressed company around, to ensure it can survive the downturn, and to make it a winner of the crisis with better strategic positioning, a higher market share, and higher profitability. The measures are grouped in four workstreams:

• Finance & Legal
• Operations
• Organization & Human Resources
• Strategy

The target of all measures is to cure the company, and to avoid insolvency, administration, or liquidation.

Similar to the work of a medical doctor, BIC handles a restructuring project in three main stages:

Stage 1: Health Check and First Aid
1-2 weeks
Quick checkup of the company’s situation in pivotal areas Definition of first-aid-measures for all work streams Management report with survivability forecast	Examples: Finance & Legal: Cash Flow projections, debt structure analysis, creditor analysis, market risk analysis Operations: Revenue forecasting scenarios, cost behavior analysis, inventory analysis Organization & HR: Review of capacity usage, analysis of employment contracts, analysis of collective labor agreements
Stage 2: Diagnosis and Therapy Definition
1-3 months
Throughout analysis of the company situation for all work streams with comprehensive analysis report Development of several potential solution sets Development of a simulation model for testing the solution sets and for stress tests based on different economic scenarios High-level workshops with company management to choose the most fitting solution set Implementation plan for the chosen solution set	Examples: Finance & Legal: Asset analysis and asset deployment decisions, debt restructuring plan, cash management system, stakeholder relations review, analysis and redesign of long-term contracts, etc. Operations: Sales & marketing restructuring, value chain and process reorganization, cost driver identification, cost cutting program, supplier management Organization & HR: Review of the organizational chart, review of job descriptions, employee skill set analysis, definition of key personnel, design of an incentive program Strategy: Target market analysis, review of strategic positioning, strategic planning review
Stage 3: Therapy and Cure
3-18 months
Implementation of the agreed solution plan within the agreed time frame Model 1: Work in consulting capacity Provision of a restructuring office by BIC Implementation by client, project management by BIC Model 2: Co-Management Relevant executive functions will be supported by individual co-managers of BIC Common implementation by client and BIC Model 3: Interim Management Relevant executive functions will be taken over by an experienced interim management team of BIC BIC will provide a chief restructuring officer (CRO) Implementation by BIC in executive capacity

Crucial elements of restructuring projects are time and a rigid decision and implementation process. To ensure maintaining both of them, a restructuring office is provided throughout the project. BIC’s restructuring project management methodology is based on proven project management methodology:

• For every stage of the project, and for every work stream, detailed checklists and project plans, combined to a master plan, are developed and maintained
• The restructuring office develops and continuously measures the most-fitting Restructuring Performance Indicators (RPI’s) for the project
• The restructuring office consistently monitors the restructuring project status and project success with weekly status reports and support for weekly status meetings
• Comprehensive reporting and documentation is provided throughout the project.

BIC believes in the success of its restructuring work. To proof it, and to take over some parts of the project risk from the client, BIC is willing to enter into client agreements in which the remuneration is based on a combination of moderate fixed fees, and a success fee linked to the development of the agreed Restructuring Performance Indicators.

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