Value preservation through a challenging period

More so than ever before, corporates must ensure that their operations are focused on what is strategically important to the business going forward. Management teams need to concentrate their time and investment on what is core to their businesses to safeguard their operations and key stakeholders through this period.

WHAT TO CONSIDER AS A LARGER CORPORATION

Corporate restructuring is not always the answer to protecting shareholder value, particularly if the units or divisions being restructured add value to the wider group either independently or through working together with other parts of the business. Managers must, therefore, consider a number of critical factors that can help assess whether a potential restructure is the right decision to take:

• Does management have the bandwidth to support all current operations effectively?
• Could cost savings be delivered that would outweigh the revenue impact delivered by the division/unit?
• Would the sale of part of the business generate cash that could be better invested in the core business?
• Does the business unit/asset own its own customer relationships? Are these services/products delivered separately from the parent company?
• Can the business’ cash flow support the on-going requirement of all operations? Are certain parts of the business a “drain” on cash in the short or medium-term?
• Could parts of our business perform better on a standalone basis, without the restrictions of being part of a wider group?

WHAT TO DO

In these trying times, there are three key actions you need to take:

1.) Assess and review operations and divisions to conclude on which are potentially "non-core".

2.) Develop a “key issues” report to help with the feasibility of successfully completing transactions.

3.) Develop a transaction strategy that addresses the needs of all your stakeholders.