Restructurability: Can the company be restructured?

In the second step, the report should determine whether the company in need of restructuring is capable of being restructured within a reasonable period of time and which conditions must be met for sustainable restructuring. The special requirement for an IDW S6 report to determine whether your company is capable of continuing as a going concern means making a statement as to whether your company is securely financed throughout a forecast period of at least 18 months. Making a binding statement on this is a particular challenge for appraisers. Experts often have to prove to their clients and investors that they are adequately insured against misjudgements. Therefore, look closely at the expert?s statement made for continuation to see if it is binding. Its usefulness lies in these few sentences of a report that is often 100 pages long. If this central statement remains vague, you will probably not receive any restructuring financing despite a carefully prepared restructuring concept.

A “mission statement of the restructured company” is derived from the balanced treatment of these aspects in the report. This mission statement describes the restructured company. The mission statement must indicate that the company has been sustainably restructured. This is the case when all causes of the crisis have been eliminated, the company generates a long-term return that is customary in the sector and has an adequate equity ratio.

The path to this target state is to be described by a holistically designed restructuring concept, which leads to an integrated business plan for the restructuring phase. In other words, a monthly presentation of the planned income statement is expected, which flows into a balance sheet development and a cash flow development. This business plan must incorporate all assumptions and conditions made in the turnaround concept.

Companies that are capable of being restructured are not necessarily worthy of restructuring for their economic environment, in particular for their shareholders.


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