Business restructuring

Businesses have never before encountered the economic and operational stress caused by COVID‑19. The social distancing measures, shelter-in-place orders, collapse in consumer and business confidence, and the continuing uncertainty are causing immediate, significant, and costly disruption. These are anticipated to continue impacting every business along with their employees, customers, suppliers, investors, and lenders. Restructuring and adaption to overcome these issues is mandatory for companies to survive this unanticipated disruption, including preparation to mitigate the damages sustained and to re-start as markets and the economy generally begins to emerge from the current closures.

For companies that have not already addressed these issues, now is the appropriate time to take a step back to assess the operational and financial condition of companies and the broader business and financial landscape in relevant markets. The key actions every company should be taking right now include:

  • Analyzing potential demand for products or services and how the changed market conditions will impact business long term.
  • Evaluating customers, suppliers, and competitors to determine whether any critical customers or suppliers have ceased or may cease business operations, whether any extraordinary measures will need to be taken to obtain necessary materials from suppliers, and other ways in which changes in sales will impact business.
  • Assessing modifications to the business to maximize business survival, including: steps to increase revenue (potentially by using leverage or market conditions to increase prices), expedite receipt of payments, reduce expenses, and secure necessary concessions from financing sources.
  • Analyzing whether there are any additional costs associated with re-opening the business (i.e., new COVID‑related safety measures).
  • Creating a cash flow budget based on realistic assumptions on the cost to re-start, including safety costs and the impact of the environment on the business’s specific sales to project working capital needs and cash availability.

The scale of the financial impact of COVID‑19 will not be fully realized for some time. Regardless, businesses must take steps to lessen COVID‑19’s impact by being introspective and diligent in evaluating their own financial condition and the financial condition of every business upon which they depend. Businesses must assess the viability of their customers, suppliers, and other key partners and plan proactively to minimize disruptions and maximize their own likelihood of survival. Advisors with deep experience gained from spending long careers responding to distress caused by disruptive change and helping craft business solutions to not just survive but, instead, to capitalize on situations like the current one will bring immeasurable value to businesses grappling with the COVID‑19 crisis.



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