A reorganisation concept forms the basis for the assessment of a company’s reorganisation capability. An essential component of a reorganisation concept is the guiding principle of the renovated company (i.e. its future strategic, operative and financial organisation). In this process, appropriate measures are developed with the aid of a reorganisation roadmap.
The prerequisite for reorganisation potential can be expressed in five criteria:
How high are the future market opportunities of the reorganised company?
How strong is its competitiveness in the purchasing and sales markets?
Is the financing of the company ensured, with inclusion of the identified measures?
Is the company in a position to return to a profitability which is normal in the industry within an appropriate timeframe?
Is the management willing and able to implement the necessary measures to reorganise the company?
Are there any legal or factual reasons preventing reorganisation (e.g. insolvency reasons; see also survival forecast)?
In addition, the Federal Court of Justice (BGH) has prescribed legal minimum requirements for reorganisation concepts.
These minimum requirements have been summarised by the IDW in IDW standard S6. Applying this standard therefore provides orientation and a familiar framework for all the affected company’s stakeholders and, in particular, its financing partners.
Stocktaking and position determination
- Creation of a fiscal and performance-related analysis
- Evaluations of income origins
- Normalised income, if applicable
Identification of improvement potential
- Determining the causes of the crisis
- Identifying the stage of the crisis
- Assessing the essential core processes
- Translating individual solution approaches into specific action plans
- Evaluating the measures (qualitatively and in monetary terms)
Strategy and market positioning
- Market analysis
- Competitor analysis
- Analysis of core competences
- SWOT analysis
- Strategy definition and evaluation
- Guiding principle of the reorganised company
Integrated planning and presentation
- Translation of the derived findings into an integrated plan (profit and loss, finances and balance sheet)
- Acknowledgement of the identified measures
- Binding estimation of reorganisation capability
- Report presentation for the financing partners (after approval by the company management)
A reorganisation appraisal gives the company management and its financing partners legal security concerning the ability of the company to survive and/or be reorganised, as well as its obligations according to insolvency law. It creates transparency for relevant stakeholders, identifies the causes of a crisis and reveals the potential of the company. The overarching goal is the long-term reorganisation of the company with a return to a profitability level which is normal for the sector, and secured financing. Reorganisation concepts according to IDW S6 are one of the essential prerequisites for loan decisions (loan prolongation, bridging loans, suspension of redemption and deferral, collateral release and reorganisation lending).