Covid-19 has put the cashflows of many businesses under severe pressure. While business levels are starting to recover, the withdrawal of government supports will lead to greater liquidity problems and increased creditor pressure.
Crowe’s corporate restructuring and insolvency advisors can help business owners find turnaround solutions and put the business back on the recovery pathway.
Many of the problems Irish SMEs face may look daunting at first, but Crowe can help take the complexity out of the situation and guide you through the best solution. Taking the right decisions sooner leads to better outcomes and we can help you take back control.
Crowe’s corporate restructuring and insolvency team expect to see the following trends over the next 12 months:
1. Sector consolidation. We expect to see an increase in merger and acquisition activity with businesses looking to reposition or use the combined operations to put them on a stronger footing with reduced fixed overheads like property costs.
2. Increased investment by viable businesses to fund upgrades in technology and equipment.
3. Business exits. A proportion of business owners will decide to sell their business to extract maximum value from the business and its assets in a tax-efficient way.
4. Businesses transitioning to the next generation. Business owners will start to actively look at succession plans to transfer the business to the next generation as a going concern and seek to structure transfers that are free of legacy debts.
5. Corporate restructuring. Business owners will make greater use of the restructuring and insolvency options available to facilitate the sale of assets and customer bases while paying an affordable dividend to settle the cost of redundancies or existing built-up unaffordable creditor balances. These include:
- Members’ voluntary liquidations, for solvent companies
- Examinership, for large insolvent corporates
- Creditor voluntary liquidations, for insolvent companies
The launch of the Small Company Administrative Rescue Process (SCARP), when brought into law later in the summer, will also provide smaller companies with access to a more affordable alternative to examinership so they can write down legacy creditors and gain a fresh start.
Using the SCARP process can save small and micro businesses.
Each year, Crowe’s corporate restructuring and insolvency team gets numerous calls from directors enquiring about whether their company should avail of examinership. While the examinership process will address the insolvency position, the costs remain high for smaller businesses and this can often delay the decision until it is too late, forcing many potentially viable companies that could have been saved into liquidation.
The SCARP rescue process, which many family-owned enterprises would qualify for, will be a very welcome addition to the toolkit of insolvency practitioners. Crowe expects this new process to be extensively used by qualifying businesses to help purge balance sheets of unaffordable creditor debts, making them attractive again for renewed investment.
At Crowe we have programmes and models available to project cashflows and calculate the creditor dividend levels, new investment requirements and funding sources that would lead to successful SCARPs. For business owners looking at SCARP, we can generate a projected outcomes position report within a day of receiving their management accounts.
This new rescue process can be completed at a fraction of the cost of an examinership, making it easily affordable for most businesses, and it achieves the same result as an examinership – ensuring that a solvent and viable business emerges.
Our advice is to start the forward planning now so that business events do not overtake the opportunity to protect the viable core of your business. Crowe can provide a free and confidential initial consultation for businesses experiencing distress and business owners seeking an exit.
Please contact the head of Crowe’s corporate restructuring and insolvency team, Aiden Murphy to arrange an appointment.
Aiden Murphy of Crowe Corporate Recovery can be contacted at [email protected] or 01 448 2200
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