We provide restructuring services including, independent accounting reviews, corporate governance, equity raising as well as restructuring and turnarounds.
Restructuring and Turnaround
Our work in advising companies in financial difficulty, and their lenders, on the options available to the usually falls "below the radar", and due to its confidential nature, our role is generally only known about by the company's directors and/or lenders. We have assisted behind the scenes in numerous situations where a potential failure of the company has been avoided.
When dealing with a company facing financial difficulties we undertake an analysis of the business to assess whether we can restructure it or turn it around. Our policy is to look for solutions that preserve value wherever possible. By undertaking a financial and strategic analysis of the company we can create an action plan that maximises the return on investment and improves business performance.
The analysis we undertake involves:
1. Assessment
This includes assessing operational and financial issues, cashflow, working capital management, forecasts, ROI, management and overall strategy.
2. Determining the options
We identify key options to address or minimise the operational and financial pressures faced by the company. These may include some or all of the following:-
- assessing whether further sales growth is achievable
- identifying cashflow/working capital weaknesses and possible solutions
- reviewing overall profitability and suggesting how this may be improved
- reviewing the appropriateness of the company's funding structure (eg long-term debt versus overdraft funding)
- considering whether some form of refinancing is needed
- identifying areas for improvement in management and overall strategy
- reviewing the company's costs structure and identifying areas of waste or excessive cost
- assessing whether less profitable or non-core divisions can be sold (or should simply be closed)
- identifying any other capital assets which can be sold
3. Assessing the options and priorities
We then assess the likely outcomes and success of each of our options in Step 2, looking at the impacts and the risks, and working with stakeholders to determine the level of support they have for each option.
4. Creating an action plan
We agree an action plan with the key stakeholders, ensuring they are aware of the expected timeframes, results and responsibilities in the plan. We will then assist with implementation to whatever extent the client considers necessary.
5. Monitoring an action plan
We regularly review the process against the various actions and timeframes, providing reporting to key stakeholders throughout the process. The vital ingredient for any successful restructure or turnaround is that the parties involved contact us quickly, with an open mind and a desire to solve the problem. We are frequently able to assist companies in maximising value and minimising potential losses to creditors through this process.
The nature of this work is such that the options are very broad and each assignment is treated differently, based on the specific issues the business is facing. There is no standardised 'template' approach. We have experience of dealing with businesses in virtually every sector. Some fields we have had significant exposure to are construction, hospitality, agriculture and viticulture, finance and retail.
As a medium-sized specialist accounting firm we are able to respond quickly, are less risk averse and have a lower fee structure than most larger firms. We don't have the overhead costs and inflexibility of a large corporate but we are not so small that we lack the resources and the credibility to bring about change. We are also much less likely to face conflicts of interest than larger, multi-disciplinary firms.
Contact us for more information about how we can help.
Independent Accounting Reviews
An independent review is usually initiated when a financial issue or concern is identified within a business. By reviewing the business’s financial matters including its accounting practices and policies, and its broader financial position it may help set the business up for long-term sustainable and profitable growth.
When to initiate an Independent Accounting Review
If a client's relationship with its financier and creditors is strained or the company is stagnating. An independent review from a restructuring specialist may be the first step to unlock the business's full potential.
Types of reviews offered by McDonald Vague
- Snap Shot Independent Accounting Review
- Full Independent Accounting Review
Snap Shot Reviews
These are fast, independent and often cost-effective way of turning a business around if the recommendations are implemented.
The report will include the following:
- Review of the business's cashflow projections and short-term needs;
- Review of assets and security;
- Assessment of the business can be improved;
- Review of governance;
- Recommendations.
Full Independent Accounting Reviews
Full reviews offer a comprehensive review of the financial health of the business and recommendations on how to improve or restructure it.
An engagement approach will typically involve:
- Review of historical performance of the business
- Determining the current financial position and short-term needs of the business
- Determining an understanding of its operating activities, key drivers and commercial/contractual arrangements impacting financial performance of the business
- Security analysis
- Forecast projections
- Sensitivity analysis
- Benchmarking
- Understand and assess the business's:
- Strategy
- Financial projections
- Utilisation of available resources/cash
- Industry issues and any potential future significant impacts
- Management capacity/capabilities
Corporate Governance
Corporate Governance is the system of rules, practices and processes by which a company is directed and controlled. It involves balancing the interests of the many stakeholders in a business alongside the protocols of accountability and sound ethics to ensure management behaves appropriately and in the best interests of the business.
McDonald Vague is able to provide independent reviews of businesses focusing on restructuring, governance and risk management with the aim of helping companies lay the foundations to grow into larger, more profitable businesses and avoid common mistakes.
SMEs and corporate governance
In most of New Zealand’s 500,000 small to medium-sized enterprises (SMEs) there is rarely a separation between family, management and governance. Most SMEs operate without a formal board or impartial advisor.
Many businesses corporate governance doesn't keep pace with the size of its turnover and exposure to a bank or financial institution. It is important to have a sound corporate governance policy, clear strategic direction and be as transparent with your financier as possible.
Challenges for implementing governance
- The cost of engaging a consultant
- The uncertainty of the return on investment
- Where to find the right people to add value to their business
- Limited ability to attract high quality directors
- Owners may have to deal with interpersonal conflict and family conflicts
- Tough decisions need to be made to improve the business
First steps to improved governance
As a way of easing into improved governance bringing on board an independent consultant who can attend and observe board meetings is often a useful first step. This may then expand into an advisory board role.
Advisory Boards
An advisory board allows business owners access to independent opinion, along with strategic advice and expertise in an environment where they can discuss important business issues. Advisory boards aim to benefit the business by better equipping the owners with the information needed to make significant business decisions.
How McDonald Vague can help
Our skill base is in diagnosing issues, deploying commercial solutions, and advising underperforming or distressed businesses. As a mid-tier chartered accounting firm specialising in restructuring, we are well placed to offer a co-ordinated, cost-effective service to companies facing financial, structural or business management challenges.
Contact us for more information about how we can help.
Equity Raising
Companies raise capital via equity when they are not willing to raise capital through loans and not ready for an IPO. Such equity deals help the company to have an access to business experts through investors. The investors finance the business and help the company to grow and in return receive shares in the business and a share in the profits through a dividend payment.
McDonald Vague can help you prepare the financial reporting and forecasting to present to investors for the due diligence process. We also have a database of investors who are looking for companies to invest in.
Contact us for more information about how we can help.
Raising Finance
We hold a wide range of relationships with potential funders from large institutions to high net-worth individuals.
Part of the process is to assess your needs objectively to improve your chances of success and minimise disruption to your business.
When to consider refinancing:
- If your relationship with your existing financier breaks down
- When you are looking for a more competitive interest rate
- When you are looking for more flexible terms that better suit the needs of your business
How McDonald Vague can help
Because we are a Chartered Accountancy firm we can provide the financial modelling required to support your application. Our advice is truly independent and our recommendations will be based on the best fit for your business. We can charge an hourly rate for our time or a success fee.
Contact us for more information about how we can help.
Divestment-Sale of Business, Property and/or Assets
Firms may have several motives for divestitures or selling part of a business:
- A firm may divest (sell) businesses that are not part of its core operations so that it can focus on what it does best.
- To obtain funds. Divestitures generate funds for the firm because it is selling one of its businesses in exchange for cash.
- A firm's "break-up" value is sometimes believed to be greater than the value of the firm as a whole.
- Divesting a part of a firm may enhance stability.
- Divesting a part of a company may eliminate a division which is under-performing or even failing.
- Regulatory authorities may demand divestiture, for example in order to create competition.
We have been selling assets successfully for 25 years. We can advise on the method of sale and which assets should be taken to market first.
Contact us for more information about how we can help.
Hive Down
A number of our recent restructures have been undertaken by way of a "hive down".
A hive down generally involves three key steps:
1. Establishing a new corporate group with a lower level of debt funding
2. Selling the operating group or assets to that new corporate group for an agreed purchase price
3. The old group using the proceeds of the sale to part-pay down its debt and then being struck off
A hive down process can make it easier to bring in a new equity investor who doesn't want to be exposed to the old corporate structure and debt levels. Also, it can often be achieved with less than unanimous lender approval.
We can discuss if a hive down is the best way to restructure your business and give advice on whether it complies with the phoenix company laws.
Contact us for more information about how we can help.