All businesses have an inherent life cycle and sooner or later the markets mature, competition increases and margins erode and it becomes more difficult to remain in business and to sustain viability.
Preventing decline can be addressed by such actions as strategic acquisitions, launching new products, exploiting new markets or sales channels, implementing management changes and/or cost saving and redundancy programmes. Sometimes however, elements of the business may become non-core or a “lame duck” and end up being a financial millstone around the neck of the rest of the Group.
In such cases consideration must be given to the appropriate exit strategy, which usually would fall within 3 main headings-
- Fix - management may decide to implement a refinancing or restructuring either at a balance sheet or operational level.
- Sell - a disposal of the business either as a normal corporate transaction or as a distress sale (dependent upon the cash drain caused by the under-performing business).
- Close - initiate a formal insolvency process thereby drawing a line on the capital being absorbed by the loss making business.
SKSi are vastly experienced in assisting lenders, management and key stakeholders on assessing and implementing the available exit options, the likely financial recovery and the practical impact on the Group/Company or associated businesses of implementing any proposed strategy.