For the development of their activities, companies make investment and financing decisions, based on a value proposition embodied in their business model, which responds to certain market conditions and the sector in which they operate.

Companies, however, operate in an environment where the only permanent thing is change, which can come from the incursion of new competitors, the appearance of improved or substitute products, new regulation, or the emergence of disruptive business models, which can significantly compromise the continuity of their operations.

And when any of these changes or events occur, affecting the size of its sales revenues that, depending on the magnitude of the fall, could be insufficient to justify the investment and indebtedness committed, a crisis situation is generated that can compromise the financial solvency of the company.

The most common crisis situations, in order of complexity, are: i) Financial insolvency due to over-indebtedness, ii) Financial insolvency due to over-investment, and iii) Financial insolvency due to economic unviability.

¿How Can HLB PERU Help?

In crisis situations, such as those referred to, a first question that we help our clients clarify is whether it is circumstantial or structural; and whether it is structural, whether it is financial or economic, or a combination of both.

Ruling out the conjunctural nature, we focus on the study of the economic viability and validation of the company's business model, as a basis for the development of a restructuring plan that allows restoring its capabilities to take advantage of the opportunities of the market served or to be served, and to overcome the crisis situation.

This plan may include the re-profiling of the debt and/or the incorporation of new partners, if the crisis situation derives from over-indebtedness; or divestment from assets that do not create value, if the crisis situation is caused by overinvestment; or both if it comes from high indebtedness and investments in non-performing assets.

Finally, and within the framework of HLB Peru's commitment to the sustainability of its clients, if the business is not economically viable, the recommendation is to exit it and liquidate the company, in order to save as much as possible of the equity of its shareholders.

HLB PERU has expert consultants in business restructuring, ready to assist you with the greatest diligence and strict confidentiality, contact us.

Jonny Mayandía

Associate Consultant at HLB PERU