Chief Restructuring Officer
Challenge
Managing a distressed company requires bringing together specialists, such as workout bankers and distressed-company investors, with key stakeholders. The Chief Restructuring Officer (CRO) can ensure that everyone works together to proactively drive the needed changes in the organization.
Restructuring is challenging for the entire company. Once the symptoms of distress finally come to light, uncertainty typically sweeps through the workforce. At the same time, other stakeholders often respond by imposing restrictions: shareholders may call for action plans as well as additional information and reports; banks may activate special in-house departments; customers may shift orders to alternative sources; credit insurers may restrict or eliminate limits; and suppliers may apply more stringent conditions of delivery. These stakeholders may also be joined by new players, as in the cases of a sale of company shares or loans to appropriately specialized investors. Management finds itself challenged to continue running the day-to-day operations of the company, implement an organizational and financial restructuring, and manage the interests of all the various stakeholders. This is where a Chief Restructuring Officer (CRO) can play a critical role.
A consortium acquired a telecommunications company that was the product of a recent and not yet fully integrated merger. After the acquisition, the new management team immediately announced plans for an operational integration, including a threat of workforce reductions, site closures, and other changes in process. Resignations and the establishment of a corporate works council quickly followed.
The investors realized they needed to address the situation quickly and Alexion Partners was choosen as key consultant.
Approach
Top priorities included reinforcing executive leadership at the operational level and regaining the trust of the stakeholders. A CRO was brought in by Alexion Partners as an interim CEO to work with investors, management, the banks, the organization, and the various consultants. The core goals of this appointment consisted of ensuring prompt implementation of improvement measures and reporting on progress to the investors and banks in particular. This included implementing a reporting regimen and improving the reliability of information, particularly with respect to the banks.
The CRO’s first task was to increase stakeholder confidence by creating transparency. This involved regular communication with all stakeholders, preparation of a restructuring program, summaries of all measures taken under a uniform system, creation of a reliable reporting regimen, and the creation of a new business plan that included the findings of current figures and the restructuring measures involved.
Results
Once a new management team was formed, the CRO withdrew, sending a signal to the workforce that the situation was returning to normal. By that time, more than two thirds of the savings potentials identified had already been enacted, and the rest were on the verge of implementation. Both company headquarters were integrated into a single location, the regional organization was redefined, and the legal merger finalized. More than 120% of the target values originally identified was forecast to be fulfilled.
Restructuring a distressed company presents a company and its management with a set of demands very different from those that arise in the course of normal business. Too often, management becomes too consumed by the crisis to provide the leadership and communication sorely needed by both internal and external stakeholders. In these cases, the installation of a CRO can help company managers focus their activities. While the CRO concentrates on implementing the restructuring and managing the various stakeholders, the rest of the management team can continue oversight of day-to-day business operations. This can dramatically increase the likelihood of a positive outcome for the company, its employees, and its other stakeholders.