Insights from a Financial Advisory Perspective
When it comes to providing the financial resources required for a restructuring, existing shareholders or lenders are often unwilling or unable to supply additional funding. In such cases, it may become necessary to sell the company or parts of it in order to generate the required liquidity. These transactions can help reduce the debt burden, create additional financial flexibility, and enable management to refocus on the core business.
In many restructuring situations, revising the corporate strategy is a central measure — a finding recently confirmed by an expert survey conducted by Management Factory. M&A transactions can make a substantial contribution to such strategic realignments.
However, M&A processes in a restructuring environment differ fundamentally from traditional transactions. Time pressure, complex stakeholder structures, and heightened organizational strain make these processes significantly more demanding. Based on Management Factory’s advisory experience, seven factors have emerged as critical to success.
1. Striking the Right Balance Between Speed and Price Maximization
In restructuring situations, time is the decisive factor. Experience is required to determine where targeted simplifications in the transaction process are feasible — and where they are not. Not every shortcut comes without consequences for the purchase price.
Key success factors include:
- Preparing value-relevant information: Experienced teams understand which documents are truly material to buyers and where a pragmatic approach is possible without significant risk.
- Designing the process intelligently: It must be clear which steps can be streamlined and which are indispensable for maintaining competition, transparency, and ultimately price formation.
In some cases, simplifications must be accepted even if they may negatively affect the purchase price. This is part of the reality of distressed transactions: priority is given to measures that enable the process to proceed and stabilize liquidity.
The true challenge lies in making well-founded decisions about which simplifications are price-neutral and manageable, which shortcuts are unavoidable, and which must be avoided because they would disproportionately impair value. For example, granting bidders access to management and detailed information — through comprehensive management presentations, expert sessions, and well-prepared materials — can positively influence valuation by reducing information asymmetries. However, preparing and coordinating such access requires significant time and resources.
Another example concerns the number of bidding rounds. From a negotiation perspective, multiple rounds may enhance competition and increase valuation, yet each round can extend the timeline by several weeks.
2. Ensuring Adequate Liquidity at an Early Stage
At the outset of a sale process, it must be clear how much time is realistically available. If liquidity is too tight, the company may find itself under severe pressure toward the end of the process — potentially resulting in substantial price discounts.
In practice, it has proven effective to:
- Assess all options early to secure sufficient liquidity. Existing lenders, short-term operational measures, and/or alternative capital providers such as specialized debt funds can, in certain situations, provide bridge financing that is later refinanced through the sale.
Such safeguards provide valuable time and prevent the company from being forced to sell “at any cost” — one of the most expensive scenarios in any M&A process.
3. Planning the Sale or Carve-Out Within the Overall Restructuring Context
A sale is rarely an isolated project; it is typically part of a broader transformation program. The organization must implement operational restructuring measures in parallel while managing a resource-intensive sale process.
Carve-outs in particular can be highly complex.
Management Factory – A Valtus Company therefore recommends:
- Realistically assessing carve-out complexity (IT, HR, Finance, supply contracts, IP, etc.).
- Evaluating which operational measures can realistically be implemented in parallel and which cannot.
Carve-outs are typically costly, yet liquidity is often scarce in restructuring scenarios. International transactions add further complexity, including varying tax and legal frameworks across jurisdictions, the need for separate advisors, and significant coordination efforts. Underestimating complexity frequently results in delays, higher costs, and missed targets at multiple levels.
4. Defining a Dedicated Core Team for the M&A Process
Restructuring already places extraordinary demands on management and key functions such as Controlling, Finance, and Legal. Adding an M&A or carve-out process significantly increases both time and content-related pressure on the organization.
Experience shows that it is advisable to:
- Clearly separate the M&A process organizationally and assign a dedicated team primarily focused on the transaction. Individuals involved should be relieved from operational responsibilities to the extent possible.
- Engage managers and advisors with M&A experience, particularly in special situations, who are pragmatic and capable of steering processes hands-on — from preparing information and managing bidders to negotiating contracts.
In restructuring contexts, M&A is not a side project. Without clear responsibilities and sufficient resources, delays, quality losses, and ultimately value destruction are likely. A professionally structured transaction team is therefore essential.
5. Addressing Tax Implications at an Early Stage
In distressed situations, tax aspects are often underestimated. While in Austria, for example, tax-neutral spin-offs are generally possible, this option does not exist in many other jurisdictions. There, asset deals may trigger taxable gains.
Key considerations include:
- Planning for tax payments: Tax liabilities often arise with a time lag. Companies must ensure that sufficient funds remain available after debt repayment to cover tax obligations.
- Avoiding future challenges: Banks and financiers must also consider tax implications, particularly regarding insolvency clawback risks.
Professional tax structuring ensures that a company does not reduce its debt burden only to face unsustainable tax liabilities later.
6. Handling Information Sensitively and Confidentially
In restructuring situations, external perception is critical, and confidentiality is paramount. If it becomes known that a sale is “necessary,” buyers may attempt to exploit this to drive down the price. Internal confidentiality is equally important to prevent unnecessary uncertainty among employees.
Therefore:
- Maintain strict confidentiality throughout all stages of the process.
- Establish clear communication lines and messaging guidelines.
- Prevent uncontrolled information leaks.
- Implement professional stakeholder management.
The less pressure is perceived externally, the stronger the negotiating position.
7. Developing and Preparing Alternative Plans
If the sale does not materialize, a realistic Plan B is essential. It is a critical success factor in any transaction — particularly in restructuring.
Key elements include:
- Thinking through Plan B at an early stage: What happens if no buyer is found at the desired price or within the required timeframe? Plan B may include operational measures, alternative financing options, adjustments to the restructuring program, or alternative disposal strategies.
- Signaling a credible alternative: Demonstrating to bidders that the company has a viable exit option reduces negotiation pressure and strengthens leverage.
- Being prepared to terminate negotiations if conditions are unacceptable or if buyers attempt to exploit the situation.
A well-prepared alternative plan conveys stability, protects against excessive price concessions, and prevents a “sale at any cost” scenario. In restructuring contexts, this independence is a decisive component of professional transaction preparation.
Conclusion
Transactions in restructuring situations are demanding. They require significantly more experience, speed, and precision than traditional deals. Early planning regarding liquidity, costs, tax implications, and organizational complexity is critical to success.
When properly structured, however, such transactions can make a substantial contribution to stabilizing the company and enabling strategic realignment. They reduce the debt burden, allow management to refocus on the core business, and create new financial flexibility.