What is Corporate Rescue?

April 28, 2009 by  Filed under: Management 

If you have a business that is insolvent, but which has an element to it that has value, that portion can be saved. It may be that only a small part of the business is viable: that portion can still be saved and the unprofitable or decayed parts of the business either sold or written off. Any debts can also be partially written off and a new company can be pre-packed to emerge as a new legal entity emerging from the old.

The culture of corporate rescue is relatively new. Business owners and governments alike now realise the value of rescuing businesses where a rescue is possible. The effects of not rescuing a company are worse than the effects of the rescue, across many fronts, and even if a small part is being saved then that is good for the owners, the employees, the suppliers, the customers and the local community as a whole.

The more recent understanding of micro-economics has given rise to the belief that local communities thrive on successful local enterprise, and this, in part, has fostered a belief that rescue should be attempted if it is possible, because allowing a business to decay or stagnate is bad from everyone’s point of view. (It’s also bad from the point of view of paying taxes, which is another reason for government to be concerned!)

There are many true stories of businesses which have gone from strength to strength run by members of the same family or by hired managers, only to be bought by a blue chip and then made to fold through no fault of their own because the new corporate owner just didn’t understand the way the business worked. Or the blue chip itself folds, carrying all the acquisitions with it.

This may be after generations of successful trading. To the outside world they were just another statistic, but to that family it seemed like failure. It is such a shame and a waste when this happens but it needn’t be this way.

Businesses like the one described are such a case for corporate rescue. The management is sound, the employees second to none and the product first class. The business can be pre-packed, sold back to the management, and allowed to carry on trading, making profits and employing people.

Everyday we see successes like this that have to close because of circumstances and not because they have done anything wrong or out of the ordinary. In the vast majority of cases these business could be saved.

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