Sav­ing busi­ness res­cue

Finweek English Edition - - INSIGHT: LOCAL -

With the onset of glob­al­i­sa­tion and mar­kets be­ing ex­posed to the ef­fects of global re­ces­sions and eco­nomic down­turns, the fun­da­men­tal prin­ci­ples on which busi­ness op­er­ates have changed sub­stan­tially. Some busi­nesses have thrived in this new con­text, while oth­ers have strug­gled to re­main com­pet­i­tive, as ev­i­denced by the in­creas­ing trend of cor­po­rate fail­ures and the con­sid­er­able in­crease in liq­ui­da­tions. As a re­sult the con­cept of cor­po­rate re­newal and busi­ness res­cue has be­come an in­te­gral el­e­ment of the strat­egy of or­gan­i­sa­tions, par­tic­u­larly for those who are fi­nan­cially distressed.

Re­cently there has been a lot of press with re­gard to busi­ness res­cue and its ef­fec­tive­ness in terms of meet­ing its in­tended pur­pose, ie to max­imise the like­li­hood of a fi­nan­cially distressed com­pany con­tin­u­ing in ex­is­tence on a sol­vent ba­sis. Busi­ness res­cue was in­sti­tuted with the hope that the busi­ness will emerge from the res­cue in a po­si­tion to sat­isfy the claims of cred­i­tors more ef­fec­tively than if the busi­ness were to liq­ui­date im­me­di­ately. in­vest­ments sec­tor (ie fi­nan­cial in­ter­me­di­a­tion) and a fur­ther 28% are from the whole­sale and re­tail ser­vices sec­tor. An in­ter­est­ing ques­tion to ask is what the rea­sons are for the low suc­cess rate of busi­ness res­cue. One of the crit­i­cal suc­cess fac­tors for busi­ness res­cue is the abil­ity of the busi­ness res­cue prac­ti­tioner to se­cure turn­around fi­nance (re­ferred to as post-com­mence­ment fi­nance or PCF), in or­der to restore the com­pany’s fi­nan­cial health.

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