Industry Insight

A Guide to  Restructuring 

By Declan Guerin, formerly Group Chief Restructuring Officer & Divisional CFO, Rolls Royce Plc

As the fallout of the Covid-19 pandemic continues to impact businesses many will need to adapt to survive. Melanie Clark, Managing Director of Azura Search recently spoke to Declan Guerin to gain his insight into how to go about restructuring during a crisis.

With over 25 years of international experience across capital goods and B2B services, Declan has a proven track record as an executive level business leader. In his most recent role as Group Chief Restructuring Officer at Rolls Royce Plc, Declan brought a long-term restructuring programme launched in early 2018 to a successful conclusion having substantially delivered on its objectives. 

Often when people think restructure, they immediately jump to cost cutting, however, there is much more to it than just cutting cost. In recent years there has been a big movement towards also restructuring culture and innovation.

“Rolls Royce Marine business dropped 50% in revenue and lost 35% of its people 2013 to 2017 but went from lowest employee engagement to highest”

In this restructuring guide Declan outlines his four stages of the restructuring process.

Assess situation:

1. What are the immediate mitigations?

a) Reduce cost expenditure / cash position fast;
      a. stopping all discretionary spending,
      b. stop / delay capital expenditure outlays,
      c. working capital actions; accelerate receivables collection, delay payments where contractually
      possible, review inventory replenishment levels etc.
      d. elevated approvals

b) Manage labour costs tightly:
      a. immediate hiring freeze, potential actions on working time reduction, deferred and
      reduced pay
      b. utilise government support schemes available e.g. furlough
      c. reduce contractor /agency levels and external spend on consultants etc.

c) Assess and manage immediate liquidity position
      a. Short term forecasts of cash in/out e.g. 13 week forecast,
      b. Medium-term assessment of available liquidity e.g. 3 year plan and address any shortfalls via new
      debt or equity funding (and a first view on potential structural actions needed)

d) Align executive team and Board around current situation, actions needed, implications, risks and trade-offs.

e) Set up dedicated team / control tower to provide clear visibility and daily management

2. Understanding the new normal

a) What are the impacts on your industry sector short-term / medium-term / long-term e.g. COVID-19 impact on tourism heavily negative short-term but probably neutral medium-term, impact on aerospace heavily negative short to medium term, online retailers heavily positive short-term etc.

b) Understanding these will drive decisions / actions needed and will be different per industry sector e.g. what is the expected sales outlook, what this means for profitability, is furlough labour enough vs. permanent job reductions, production capacity adjustments needed +/-, are there opportunities to grow organically or via M&A

c) Talent assessment : do you have the right leadership bench to deal with the new reality e.g. if turnaround do you have the gritty and more directive operational turnaround skills, if an opportunity to expand do you have market development skills etc.

Survival plan:

1. To understand the cure a proper diagnostic is needed
a) Market intelligence: what is the market situation short / medium / long-term and your position within that market i.e. structural changes to market, growth outlook, your market share relative to other players, pricing environment / pressures, channel development, potential disruption etc. This should result in a set of top line / sales scenario for you.

b) Business implications: the top line / sales scenario will give you a view of what cost position is needed to be viable going forward. This will then determine what scale of action is needed to direct costs, overhead costs, footprint, employee levels etc.

c) Internal assessment: poor performance often falls into the “self-help” category and the diagnostic should also address; management capabilities / bench-strength, financial management, sales efficiency, operations efficiency, culture etc.

2. Mobilising for action i.e. a coherent plan of execution
a) Develop an execution plan encompassing needed workstreams, workstream resources, key execution milestones etc. this will be granular and encompass job reductions, footprint, working capital, sales optimization, investment needs, cash/liquidity actions etc.
      i. Consider internal and external inter-dependencies i.e. between workstreams, customer and supply
      chain impacts etc. e.g. likely key customer and suppliers will be distressed too and important to avoid
      being used / squeezed as a “bank”.
      ii. Be holistic to ensure plan covers more than just cost i.e. are enabling investments needed, change
      management, people and culture, organization design etc.
      iii. Have an integrated financial plan covering all aspects of business as usual, restructuring actions and
      associated investments to ensure clear line of sight to progress and importantly, to liquidity (and
      potentially covenant) headroom

b) Appoint a CRO and establish a dedicated team / PMO to provide clear visibility on committed targets and daily / weekly management

c) Align executive team and Board around current situation, actions needed, implications, risks and trade-offs.

d) Manage other stakeholders appropriately e.g. investors, debt providers, government, customers, key suppliers, partners.

e) Tight governance essential: CEO owns and seen to own plan, role of CFO and CHRO important too, consider establishing a tight steering group to ensure decision and execution pace.

f) Communications internal (bring employee with you) and external (manage expectations etc.)


A longer-term viable path for the business should be developed in parallel with developing a survival plan. This is essentially a strategic exercise and will be around leveraging core capabilities, investment to new growth areas to capitalize on market growth and increase market share. The feasibility of this plan is linked to the ability of the organization to turn itself around and should not distract management attention from this.

The immediate crisis will also present opportunities to accelerate change through retiring older legacy product, accelerated digitalization, new business models, new technologies, ways of working, automation etc.

In terms of investor language this could also be called having a coherent “equity story”.

We hope you found this guide to restructuring useful. Thank you to Declan for putting it together and sharing his insights. If you have any questions for Declan or would like our help with your talent assessments please get in contact with Melanie today on [email protected].