Both large corporations and small and medium sized enterprises (SME’s) are becoming increasingly sophisticated in their approach to dealing with a failing business, and their financiers are more comfortable being involved in a controlled turnaround.

However, communicating effectively with all key stakeholders is crucial. Proper management of stakeholders may be the difference between success and failure. Key stakeholders need to be convinced that rescue, rather than termination, will be the better outcome.

The turnaround process is not just about establishing normality. Long-term change and process improvements are essential for future growth, cash flow and profitability.

Emergency phase

The turnaround process is time-critical, requiring urgent cash and strong stakeholder management. It means finding the source of the downward spiral. This can be difficult, as it requires an objective and unbiased approach to diagnosing the business’ financial, operational and strategic positions.

Growth & renewal

At DW Advisory, we can help rebuild confidence between a business and its stakeholders by providing a bridge between any knowledge gaps and reinstating fluency between the parties through appropriate communication. To achieve this, we analyse and understand what is at stake for all parties before starting any negotiations.
Stakeholder management is about gaining and communicating information. Understanding a stakeholder’s impact in the turnaround process through proper analysis is essential and includes working through the areas outlined below.

Where does the financier fit within the business?

Are they a key supplier, debt or equity provider?

What are the implications on the business and its cash flow if they turn off the financial tap?

Are there any alternatives?

A ‘plan B’ provides certain comfort when negotiating in any situation. However, if a ‘plan B’ is not available, negotiate cautiously. Understand what is on both sides of the table, emphasise the benefits and be informed on any downside.

What are the expectations & limitations?

We assess the needs of the business against the expectations of the stakeholder and find some middle ground between them. This can be a long drawn-out process, but an important one. Knowing the limitations of all parties will help gain an understanding of where the compromise may fall.

Is there history?

Armed with a diagnostics review, we can demonstrate that a business is capable of change and that the right team is in place to give effect to that change.

What is the fine print?

A full review of the relevant documentation is necessary to understand what legal steps a stakeholder may take in relation to a defaulted position. What rights does the stakeholder have that could seriously disrupt the turnaround strategy and plans for the future of the business?

Avoid infighting

The management of competing interests is often a complex and delicate task, which requires timely communication of relevant information throughout the turnaround period.

Communication

It is essential that communication is open and honest; clear, concise and continuous; and based on high-quality objective information. This is not just a quick fix. The actions taken in early negotiations will lay the foundations of hopefully a long-term relationship.