A new type of corporate redeveloper will be required after the Corona Pandemic!

In Germany, the number of corporate insolvencies is likely to rise significantly in the wake of the Corona crisis, according to credit rating experts. "As things stand, we expect up to 15 percent more corporate insolvencies in Germany in 2020," business information service provider Crifbürgel told the Augsburger Allgemeine newspaper. The number is likely to rise further in 2021

Restructuring the liabilities side and performance management do not go far enough in corporate restructuring. Only a strategic transformation ensures the future viability of the company!

SEViX: Mr. Ulrich, the number of restructuring cases is skyrocketing due to the Corona virus - in contrast to the number of qualified restructurers who can demonstrate expertise in the field of strategic transformation, which is essential from the point of view of creditors. How can the approaching wave be managed?
Ulrich: The restructuring wave was already rolling in the first industries in the second half of 2019, but the coronavirus crisis is now making it even more severe. Here, a problem becomes apparent: While the number of restructurings has increased and will continue to increase, the number of restructurers has remained the same. Some banks even cut their workout units and made them more centralized, such as Commerzbank AG and DEUTSCHE BANK AG.
In our view, there will not be enough restructurers with strategic expertise to cope with the rising number of cases. New qualifications and qualities are required from existing restructurers. In addition to strategic and social skills, more courage to think laterally and lead change will be required in the future. Since anticipatory skills are a MUST for the new type of corporate reorganizer, lawyers cannot fulfill this requirement profile.
There is no doubt that there are few restructurers who demonstrate expertise and passion primarily in strategic transformation. Turnaround, operational transformation and performance management fall short, as does restructuring of the liabilities side.
SEViX: But let's get to the point. Can you explain clearly why the number of restructurings will increase significantly?
Ulrich: In the fat years, many companies fail to invest sustainably in their own future viability and to implement a strategic transformation or build a resilient business model,
SEViX: Can you explain this with a practical example?
Ulrich: With pleasure. Take a look at the chart of the stock market performance of companies "A" and "B" operating in the same industry, which has been anonymized.
In general, the 2010 financial year - following the shock of the Lehmann bankruptcy in October 2008 - was perceived as a year of recovery. The order intake, order backlog and sales of the two companies showed significant improvements compared with the previous year 2009.
However, Company "B" had a strategy developed jointly with the stakeholders, which was immediately operationalized when the early warning indicators occurred. At Company "A" - with a weak CEO - the "principle of hope" for better times was rampant. In the 2009 financial year, Company "A" reported a total consolidated loss of approximately EUR 132 million - with total assets of EUR 1,071 million. Company "B" had paid dividends even in the crisis year. Compared with 1997, Company "A" had no significant increase in stock market value; Company "B", on the other hand, had a peak stock market value increase of +1,200%.

SEViX: What is the role of the Supervisory Board?
Ulrich: The task of the supervisory boards is not only to stay afloat and act as sparring partners for the boards, but above all to correctly assess the long-term prospects of the company and to act consistently - in the event of poor performance by the boards. A suitable CEO ad interim is definitely better for the company than the continued employment of an "empty suit!" SEViX GmbH has an excellent business transformation manager in Dr. Thomas Forster, who has often acted very successfully as "CEO ad Interim"!

What are the trends to consider in a strategic business transformation?

SEViX: What business transformation trends are being amplified by the Corona Pandemic triggered crisis?
Ulrich: First, faster adoption of new technologies. The world is experiencing a crash course in e-commerce, digital payments and remote working. More medical innovations beckon, including gene editing and med-tech technologies. The Life Sci-ence sector is becoming the sustainable growth engine!
Second, global supply chains are being reshaped, accelerating the pace of change since the start of the trade war. Companies will seek greater security buffers and a critical mass of close-to-home production in highly automated factories. Cross-border corporate investment could fall 30-40% this year. Global firms will become less profitable but more resilient.
Third, the final long-term shift is less certain and more unwelcome. A further increase in corporate concentration and cronyism, as government money floods the private sector and large firms become even more dominant. Already, two-thirds of American industries have become more concentrated since the 1990s, undermining the vitality of the economy. Now, some powerful corporate leaders are ushering in a new era of collaboration between politicians and big business - especially those on the growing list of companies deemed "strategic."
SEViX: Thank you very much for your very interesting comments, which are helpful for companies and creditors who need an experienced corporate rehabilitator of the new type.

Short introduction of Rainer E. Ulrich:

Rainer E. Ulrich, mentally robust, coupled with the situational measure of empathy, has an illusi-onal understanding of business reality. As Managing Director and Executive Manager of mid-sized companies and portfolio companies, he has led several business transformations. Thanks to his very good analytical understanding, his antipa-tive sense for new customer needs and for what is feasible, successful stra-tegies were developed. He is extremely adept at integrating the ideas and insights of employees, colleagues, customers, suppliers and institutions into the new value creation architecture. With his decision-making power and transformational leadership style, he was able to impressively and demonstrably implement the strategy in operational practice. Rainer E. Ulrich is the founder of SEViX GROUP, which specializes in business transformation.