The restructuring of corporations, whether purely
financial or in response to changed market conditions,
is becoming one of the most complex and emotionally
charged business challenges.
In many respects the modern restructuring experience is like being among warring tribes – creditors take on debtors, junior debtors defy senior bondholders, hedge funds try to outwit longer term shareholders, and managers and board members confront politicians and the trade unions. Teams of advisors, drawn largely from banking, the law and accountancy, patrol different but overlapping corners of the battlefield. And wild rumor – that mercenary menace especially pervasive in the online media – stalks and ambushes the unwary.
What is new for participants in the current restructuring cycle is a level of complexity unfamiliar to previous generations. Companies are now increasingly located in different territories and operate under several jurisdictions; balance sheet structures are entangled by layers of separate holding companies; and share-holders and creditors breed like multi-cultural polymorphs.
In the next 18 months the number of distressed debt deals in most developed countries looks set to jump sharply. Ideally, stakeholders will pull together behind closed doors to find the optimum solution – be it selling off a business, renegotiating or writing off debt, injecting fresh capital, or closing a plant – and communication will be kept to a minimum. But in the real world of stakeholder “tribes” with conflicting agendas and ambitions, participants should not count on it and should brace themselves for open and protracted warfare.
A first class communications strategy for today’s restructuring challenge requires in our view three key dimensions: a strong grasp of the new rules of media engagement, an ability to anticipate the likely reactions of opposing “tribes”, and a preparedness to work in a financially ambidextrous multi-cultural environment.
Understanding new media’s role
Corporate restructuring has always been politically and economically sensitive – but never more than it is today. Every type of media outlet from daily newspaper and television to financial wire service and online blog is likely to be interested in the progress and outcome of transactions likely to affect employment and corporate ownership.
The media’s role has become all the greater in the wake of the economic crisis, fueled in part by public anger at the role of financiers. Whereas restructuring stories appeared largely on the business pages in previous recessions, non-specialist journalists are now eager to learn more about, and write about, the seemingly arcane world of debt finance. In their quest for novelty, it should be noted, exaggeration and cliché – “all private equity funds are vultures” – are particular risks.
The online world, connecting media commentators via blogs, online publications and social networks, presents opportunities as well as threats. General Motors, for example, used the internet to good effect to provide a regular update on the positive aspects of its huge restructuring in process, presenting the new GM post Chapter 11 at http://www.gmreinvention.com/. Trade unions in France, meanwhile, have created a blog which systematically tracks distressed LBOs where employees are at risk, and use it as a manifesto for protests and public actions see http://www.collectif-lbo.org/accueil.html