Investing in companies that are faced with a challenging environment comes with its fair share of risks and rewards, says Don Millar, Senior Executive at Nimble Special Opportunities. He believes that for an investment into any business to be successful, it requires all parties involved to apply trust; to the engagement, to the process and to the relationship, all within an agreed common intent.
In challenging economic times, the need to restructure is a fact for many companies and is an opportunity to right the business and set it on an upward track. Our differentiation is to be able to focus where traditional funding partners don’t; we combine the advisory, capital and credit skills to deliver customised solutions to businesses, their shareholders, and their existing funders.
Recent data from the Deloitte Restructuring Report 2023, shows that almost 85% of surveyed C-suite respondents anticipate an increase in business rescue type activity in South Africa. Load shedding, high inflation, and a weak macroeconomic environment are playing havoc with companies across sectors.
Our bespoke approach allows us to contemplate solutions across the investment universe, with some companies needing to be rescued from near extinction, others needing a course correction, while some may need to apply creative solutions to restructure their capital to make it fit for purpose for the current environment. Often, it is a combination of these elements.
Inherently we look for strong sustainable businesses, which may be under strain either at a shareholder level or a business level, where we can apply our experience and thinking. This provides an opportunity to reassess the fundamentals of the business, and provided there is a robust business model, the process should result in the company returned to a healthier course. A successful restructure can in fact create substantial value for all shareholders and, importantly, secure jobs for employees.
What are the keys to a successful restructure?
While smart financial and strategic business decision making is critical, there is more to a successful restructure than just the numbers. Essential to any successful restructure is the people interactions.
Building trust and rapport between the experts and the management team is a significant challenge in any restructure negotiation, however it is the foundation of any successful restructure because all parties need to be aligned to proceed with the process. Importantly, the management team need to be motivated, aligned, and empowered to execute on the revised business strategy.
We know from experience that if the relationship is anchored in trust, we are better equipped to reach our goals for the business collectively and not at the expense of anyone. After all, we should all have the same objective in mind – that is to ensure the ongoing success of the business. To achieve this, from the outset, all parties need to agree a common goal and be aligned in order to proceed with the process. Patience is also required, as restructuring can take some time.
An approach based on deep experience.
At Nimble Special Opportunities, the core of our investment purpose is our commitment to provide sustainable solutions which contribute positively to the societies and environments in which we operate.
When investing in a company, we ensure we really understand the business and the issues that resulted in the difficult situation it faces. We have deep experience across a number of sectors, and this ensures we add value. Further, having been involved in many successful restructure situations, we have an extensive network that we can tap into to help us ensure the company’s successful and sustainable turnaround.
Why a bespoke solution is preferable.
Before we make an investment into a company, we undertake a detailed and candid assessment of the company. We collaborate closely with all relevant stakeholders to understand the root cause that has resulted in the difficult situation the company faces. We also assess whether we can add value to the business and ensure that we are aligned with the management team.
We have learnt over the years that restructuring looks different for all companies and should be seen as a positive intervention. Too often people only equate a restructure within a business rescue or liquidation, this is not the case. Very often circumstances within the company or within a shareholder situation drives the need to restructure to make it appropriate for the times. For example, one company may need a change in strategy or amended capital structure while another similar business may require a full resuscitation or turnaround depending on their situation. Often the situation is not of their own doing and a bespoke solution is required to correct their course. This may be in the form of working capital or improved terms with creditors and customers.
Our ultimate goal is to build solid relationships with the companies we invest in, based on trust, transparency, and shared success. We remain actively involved in the companies and provide support to the management team and expertise where required. We believe that a commitment by all stakeholders to trust the process can and will deliver the best outcomes.
