Mergers and Acquisitions (M&A) refer to the process of combining two or more companies to form a larger organisation. This process often involves the purchase of one company by another, or the merging of two companies to form a new entity.
HOD M&A and RESTRUCTURING
M&A Specialist and certified Business Rescue Practitioner
M&A is often used as a strategic tool to achieve growth, increase market share and gain competitive advantages. However, it is also often used to divest non-core businesses or assets, reduce costs, or consolidate industries.
RESTRUCTURING, on the other hand, refers to the process of changing the organisational structure, operations, or financing of a company in order to improve its performance, adapt to changes in the market, or address financial distress. Restructuring involve a wide range of activities, such a downsizing, outsourcing, changing the product mix, divesting assets, or renegotiating debt.
M&A and Restructuring are closely related because they both involve significant changes to the structures and operations of a company. M&A can be a form of restructuring because it can lead to significant changes in the organisation’s structure, operations and strategy. Similarly, restructuring can sometimes involve divestitures or spin-offs of non-core businesses, which may then be acquired by other companies in an M&A transaction.
Both M&A and Restructuring can have significant impacts on a company’s stakeholders, including shareholders, employees, customers and suppliers. It is important for companies to carefully consider the potential risks and benefits of these activities and to develop a comprehensive plan to manage the process effectively. Fio’s professional team of specialists will assist you in making the right decisions and are backed by professionals in a number of specialist services, ensuring that you get an all-in-one service and value for your buck.
The South African economy has been significantly impacted by the Covid-19 pandemic. It is estimated that during the 2021 financial year alone, approximately four hundred companies were placed in business rescue. But what is business rescue and why is it relevant to small business owners and entrepreneurs in South Africa?
Broadly speaking, business rescue is a legal process aimed at facilitating the rehabilitation of a financially distressed company. The term “financially distressed” is defined in section 128 of the Companies Act, No. 71 of 2008 (the “Companies Act”). A financially distressed company is one which (i) appears to be reasonably unlikely to be able to pay all of its debts as they become due and payable within the immediately ensuing six months or (ii) a company which appears to be reasonably likely to become insolvent within the immediately ensuing six months.
The rehabilitation of a financially distressed company is facilitated in three steps. First, the company, its business and property together with the management of its affairs are placed under the temporary supervision of a business rescue practitioner (the “BRP”). Secondly, a temporary moratorium (or stay) on the rights of claimants (for instance creditors) is imposed. Finally, the rehabilitation process is facilitated through the development and implementation of a business rescue plan. If approved, this plan serves to restructure a company’s business, property, debt, affairs, other liabilities and/or equity. The statutory regime which governs business rescue and the steps described above can be found in chapter 6 of the Companies Act.
The primary aim of business rescue is to maximise the likelihood of the company continuing to exist on a solvent basis in an manner that balances the rights and interests of all relevant stakeholders. If this is not possible, the secondary aim is to restructure the business in a manner that results in a better return for the company’s creditors or shareholders as opposed to the immediate liquidation of the company. It is important to bear in mind that the liquidation of a company and placing the company into business rescue are two distinct processes. Business rescue is concerned with the preservation of the existence of a company for the benefit of its stakeholders, while liquidation is the winding up of an insolvent company, in terms of which the rights and interests of creditors are paramount. In order for any company to be a candidate for business rescue, it must be financially distressed and there must be a reasonable prospect of rescuing the company.
For more information on Fio’s M&A and Restructuring Services, please feel free to contact us today.
Business Consultant, Business Rescue Practitioner, Liquidator