Restructuring Branch-Based Enterprises – Best Practice
By Sven Dierking, Gehrke econ Group
One of the biggest institutes for research on retail issues in Germany predicted a significant sales decrease for over-the-counter retail in Germany. Current reports of the distributors already show declining visitor numbers in more than half of the stores. This development results mainly from an increase of e-commerce and demographic changes and will lead to a more rigorous selection process.
In order to ensure sustainable profitability and liquidity, many companies need to restructure their business model and strategic orientation. Therefore, they must create a lean cost structure and reorganise their branch portfolio. In particular, it is important to support the most profitable stores through long-term contracts, close unprofitable stores and improve the remaining stores through performance management. Within the reorganization of the branch structure, international branchbased enterprises need to fulfil high demands of various stakeholders. A lot of economic challenges arise during negotiations due to the need to ensure that the interests of all stakeholders are safeguarded.
Despite the economic challenges, it is also important to consider the regulatory framework of the particular country, in order to minimise the liability risks.
Besides the need for compliance with local restructuring regulations for enterprises in serious economic diffculties, there are various regulations concerning rental agreements and the workforce. Branch-based enterprises typically bear an area of conflict by different interests of stakeholders, usually consisting of suppliers, investors and landlords. Therefore, it is important to consult an industry expert, who can mediate between the stakeholders in conflict situations.
There are many law regulations in different countries, which must be considered for branch transfers. In Germany, for example, there is an important labour-law regulation, which provides the right of objection. The result is that, in the event of a branch transfer, employees can refuse to be transferred to the new branch owner and thus remain at their previous employer.
Depending on the number of transferred branches, it might also be possible that employees from non-transferred branches can claim to work for the buying enterprise. In order to reduce the liability risks it is mandatory to consult a local expert. In conclusion, it is very important for international branch-based enterprises to build a restructuring team of industry experts and local experts. While the industry experts focus on internal measures, such as the range of goods and the staff schedule for improving the performance or building up a lean administration structure in the back offce, the local experts focus on negotiations and contractual arrangements in order to minimise the liability risk.
The main goal is to build an overall project which is centrally managed.
Sven DierkingGehrke econ Group, Hanover, Isernhagen, Germany
T: +49 511 700 50 600
Gehrke econ Group offers tax consulting, auditing, legal advice and business consulting from a single source. It is owner-managed and advises mediumsize companies at eye-level. Two hundred employees carry out interdisciplinary consulting projects specialised on the economic sectors automotive, real estate, food, textile and health care.
Sven Dierking is one of the managing partners at Gehrke econ Group. He has more than 15 years’ experience in integrated business planning, corporate finance and business restructuring, as well as M&A.
Published: Debt Collection, Restructuring & Insolvency, No. 10, Spring 2019 l Photo: johas - stock.adobe.com