In the current economic climate many Spanish businesses are turning to restructuring specialists to help them navigate efficiently through difficult times. When it comes to choosing a restructuring advisor, Spanish companies and banks are increasingly seeking a name they trust and a proven track record.
KPMG’s Spanish Restructuring team comprises experts from a range of backgrounds including finance, banking, strategy and engineering. The head of the practice, Angel Martin, began his career at KPMG (Madrid and New York), before leaving to work in house for a quoted corporate business in the north of Spain, returning to the flock to launch the newly-founded practice in 2000, after training in the London Restructuring practice of KPMG.
“When KPMG first launched the Restructuring practice in Spain, times were good and few companies or banks needed the support of Restructuring specialists. Therefore the bulk of our work was with private equity firms, which often needed advice on managing their portfolios, and corporates.”
“Based on the strong reputation of our UK Restructuring practice in advising lenders and our integrated UK and Spanish teams, another core business area for us was working with UK banks in their Spanish loan portfolios, where we gained a strong reputation having the possibility of approaching Spanish financial institutions (banks and saving banks) which recognised the benefit of our advice for restructuring their biggest stress and distress loans. Roll on a few years and when the credit crunch bit, more companies and financial institutions in our home market turned to us for advice.”
KPMG’s Restructuring practice offers advice on both financial strategy and operational strategy for stress and distress businesses, each of which can be sub-divided into two distinct areas, finance and operationals:
Turnaround planning and implementation: In this field KPMG works with management teams in order to help create decisive strategic and operational plans to turn around stress and distress businesses. Here, the practice deploys small, experienced teams to work with all levels of management to understand the potential causes of underperformance and help develop a turnaround strategy.
The aim is to provide a clear understanding of the needs of stakeholders and to provide solutions on how to address differing agendas. Furthermore, within this practice, the team focuses on the development of operational plans to help support the delivery of the strategic plan, and also looks at the potential financial and strategic impact of corporate actions.
Martin says, “As a team we always give the best advice for the company, and that doesn’t always equate to what the management team want to hear. Our principal concern is for the health of the business.”
Corporate financial restructuring: This involves diagnostic assessment, debt advisory, liquidity and working capital management, the development of robust operational and financial plans to underpin the restructuring communications and negotiations with lenders and other stakeholders, accelerated M&A advice, strategic financial advice and contingency planning.
Operational restructuring: In this area, the Restructuring team aims to provide a delivery of profit and loss savings right through to the bottom line. Here, KPMG works with management teams to help deliver profit and reduce the impact of loss, focussing in maximising cash.
This is achieved by an analysis of the underlying cost-drivers and a generation of ideas across a business, implementation of a tried and tested methodology for the validation, approval and delivery of actions and the delivery of improvements through line management, without disrupting the overall business.
Strategic cash generation: The team works with the management of companies to help generate cash and embed a cash culture within the business.
A key aspect of this system includes working capital cycle reviews in order to identify opportunities for improvement, detailed balance sheet reviews to engender cash generation, hands-on assistance in implementing opportunities and the development and transfer of skills to the management team.
Another core competence of KPMG Spain’s Restructuring in the restructuring team is their ability to structure and implement the best possible strategy during times of crisis. Here, the team offers lender advisory, turnaround and cash management services.
In the field of lender advisory services, the practice helps lenders assess their options for repayment, refinancing and recovery from underperforming businesses. To this end, the team provides an independent business review, including diagnosis of sources of underperformance, a security review and collateral options, contingency planning services, an assessment of the management team, strategic insolvency advice, and gives options assessment for strengthening the firm’s credit position. It can also undertake inter-creditor negotiations and deal structuring if required.
When it comes to turnaround executive management, the practice offers crisis management with the aim of stabilising the business with the view of implementing turnaround. KPMG can provide practical plans for restructuring the business and increasing the speed of turnaround, install executives into key leadership positions and help ensure a timely flow of information. They also manage communications between the board of directors, management team and financiers and offers fallback planning and also provides deep and broad support by tapping into KPMG’s network of firms.
In terms of crisis cash management, KPMG’s main aim is to help stabilise cash flows and buy time in order to promote effective negotiations with stakeholders. This is achieved by in-depth analysis of immediate and near-term funding requirements, development and transfer of robust cash flow forecasting processes to the management team, the identification of short and near term cash generation and the provision of advice to the management on means of effective communications with stakeholders.
Another key area in which the practice offers substantial support is that of exit planning and implementation. Here, the team often assists companies looking to relocate or close down. Spanish subsidiaries of foreign companies, in line with the rest of Europe are often inclined to relocate to be closer to their clients or target audience. In the case of Spanish subsidiaries this often means Eastern Europe. Other factors driving this include cost benefits of the region to which they are moving, and improved and more flexible labour arrangements. KPMG can help a business to liquidate in one jurisdiction in an organised way, in order to facilitate a move to a new market. The practice also advises on cash management, tax, labour and legal advice to minimise the cost for the relocation.
Crisis could end up in and insolvency procedure. The Restructuring department of KPMG provides financial, strategic and legal advice to get in and out and insolvency procedure in Spain. They have been appointed by the Spanish SEC as an administrator of the biggest insolvency procedure in Spanish history, Martinsa Fadesa.
In terms of the type of business that KPMG in Spain works domestically, the restructuring team is particularly active right now, in the automotive, real estate and related industries, retail, distribution and other industries. Combine this with the depth and breadth of expertise from the heads of the different sectors of KPMG, the team offers a true ‘one-stop-shop’ for any businesses under stress or distress. Today, KPMG are kept busy with key issues that trouble the Spanish market; the real estate crash, the banking crisis, the fall of the retail sector and the imminent decline of the rest of the industries. π
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