Article

Exit strategy solutions: rectifying underperformance

Alistair Wardell Alistair Wardell

In light of all that's happened in 2020, some organisations may find areas of their business that are no longer viable. Alistair Wardell explains how we can help you implement difficult exit strategy solutions when part of a group needs to improve, be sold or close.

As government support winds down, restructuring may be inevitable in order to maximise value and minimise leakage. Many businesses have fundamentally changed with some areas now non-core, underperforming or located in geographically unattractive areas.

Our team can help you make the right exit strategy decisions to move forward and improve your business resilience for the challenges ahead. Find out how we've helped your peers find the right exit strategy and restructuring solutions.

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The state of the sector

Business leaders in 2020 were focused on the financial and operational continuity challenges created by COVID-19. Ensuring employee safety, facilitating remote working, assessing the resilience of suppliers and managing government support packages all took their toll on resources.

In 2021, you will need to look at how your operations continue or restart, and assess their position in the aftermath of all that's occurred. The last 12 months may have highlighted underperforming areas of your group and the demand for a product or service may have diminished.

The move in recent years from globalisation towards protectionism, coupled with potentially large swings in currencies following significant international fiscal and monetary policy interventions are also factors that may render some operations unviable.

Likewise, the Brexit trade deal will lead some organisations to review operations and determine whether remaining in a location, or indeed a sector, is optimal for the group.

Many groups will have to deal with subsidiaries that are non-core, underperforming or in geographically unattractive areas. An exit strategy will be key for management to decide whether they should improve, sell or close those businesses.

 

Case study

Project Flower

We carried out a strategic review of a £100-million turnover agribusiness group that was facing financial difficulties following the loss a major customer that represented 40% of its turnover.

Our team assisted management in assessing its exit strategy options, including sale, closure and turnaround. Based on our analysis, management concluded that one of the businesses was suitable for a management buyout (MBO), but the loss of the customer rendered another unsustainable.

After facilitating the MBO, we then worked with management to produce a fully costed and bespoke closure plan for the loss-making subsidiary. We also managed its implementation to minimise value leakage from the group.