We work with management to streamline a company’s group structure to match operational requirements, cutting cut complexity, costs, management time and risks. This combines an exit process to eliminate redundant entities, and where appropriate, extracting value to release capital in the balance sheets of group companies.
Before embarking on a corporate simplification project, it pays to take expert advice to understand your options and to agree the best way forward.
Potential corporate simplification triggers
Executive Boards are increasingly focusing on corporate simplification and entity reduction plans. There are a number of key drivers for this:
- Transparency and governance – a simplified structure can increase transparency and address corporate governance concerns
- Cost reduction – holding costs of maintaining companies with no economic purpose can be significant
- Risks management – simplification plans can identify and deal with legacy risk issues and actual or contingent liabilities
- Making business transactions easier – achieve efficiencies by better aligning the legal structure to operational activities
- Reducing the impact of increasing disclosure and reporting requirements and the costs and management time associated with them
- Releasing value - release capital tied up in the balance sheet of individual group entities; and
- Moving to an optimal group structuring after a merger or acquisition – incorporating acquisitions into a group to help achieve an optimal post deal group organisation structure.
How we can support your business
Our national team of specialists work alongside businesses to plan and implement projects to eliminate unnecessary companies. This could be part of a group-wide simplification or entity reduction plan, a smaller targeted project to deal with specific companies, or as part of a wider transaction. Our flexible approach is focused on the specific needs of a business, and can include:
- Initial targeting reviews - providing advice and project management capabilities to target which companies in the group should be eliminated
- Project planning and management – building a plan to deliver the corporate simplification objectives and providing programme management expertise to support the delivery
- Mitigating risks – identifying potential risks and providing advice and support on how to mitigate them
- Specialist solvent liquidation experience and expertise – access to our national and international network of solvent liquidation specialists; and
- Transactional reorganisations – using a solvent liquidation process as an exit route for a particular transaction.
This is aimed at situations where there is a subsidiary business, a division, a branch or a brand that is underperforming or where a business has deemed it non-core and are looking to exit.
Our planned and coordinated approach can help:
- deliver an efficient and cost-effective closure, while avoiding the many pitfalls along the way
- achieve an optimal recovery of value and increase shareholder value
- productively re-deploy resources to other parts of a business
- release capital to reinvest
- avoid adverse publicity to protect a brand, and
- reduce the long-term costs by avoiding delay and obstacles that can typically occur in a divestment or wind-down.
Potential divestment triggers
There are many triggers that can result in a decision to either wind-down or divest a business, including:
- business units or subsidiaries operating in a way which is inconsistent with group strategy
- a decision to divest some non-core operations
- competitor pressure and/or margins shrinking
- decision to consolidate production and/or relocate an operation overseas to reduce cost
- non-core business that is taking up a disproportionate amount of management time, and,
- sudden changes in the market or the loss of key staff.
How we can support your business
We help to identify the issues, evaluate the options and assist in implementing the chosen approach. This could include:
- reviewing the business / operation to identify the issues that need resolving or that will impact the strategy for, and the timing of, the exit
- planning both the operational and the corporate wind-down and then the closure, including the resource and cash requirement together with the identification of the key risks and how they may be mitigated – all captured in a central exit plan
- implementing the exit plan – typically supporting an in-house team as they implement the plan but, where required, supplying dedicated specialists to carry out the implementation; and
- closing the residual company, where required, typically via a solvent liquidation or equivalent procedure.
Our extensive experience, global capabilities and ability to work very quickly are our key differentiators. Using our expertise, we tailor a solution to suit individual business needs across our local and global network as needed.
International project management
International legal entity reduction to streamline global corporate groups is fast becoming a top priority for organisations based in the UK and overseas.
Our International Centre of Excellence for legal entity reduction can build and project manage international simplification plans to eliminate surplus legal entities across jurisdictions, allowing businesses to be better prepared for the future.
Potential legal entity reduction triggers
Businesses with corporate entities around the world face additions risks and costs and therefore are increasingly focusing on reducing the number of entities to a core structure, and keeping only those that are necessary. The additional drivers include:
- Efficiency risks – a simplified structure can help to reduce administrative tasks and in-country bureaucracy that can make maintaining large international groups time consuming and unwieldy
- Transparency and governance – local governments, tax offices and the media are increasingly focusing on the transparency of corporate structures, in particular looking at those organisations with entities in potentially tax-efficient jurisdictions. Reducing group entities so that those remaining are visible and have a clear purpose can build on the reputation of the organisation and make it a little easier to do business
- Cost reduction - Keeping a legal entity alive costs money. The amount varies from territory to territory but the range of internal costs (preparing statutory accounts and other related documentation, internal Board papers, internal accounting, IT storage and infrastructure) and external costs (audit fees, tax compliance fees, filings with local authorities) can result in a substantial unnecessary costs for organisations; and
- Risks management – simplification plans can identify and deal with legacy risk issues and actual or contingent liabilities across international networks. Generally, a reduced number of legal entities within a corporate group can help to lower the level of potential risk for group directors and the overall organisation, allowing businesses to better adhere to the ever-changing and increasing levels of in-country compliance.
How we can support your business
Our International Centre of Excellence for legal entity reduction contains a specialist Project Management Office (PMO) based in London. The PMO drives an international network of experts across 130 countries and works alongside subject matter specialists to deliver multi-territory entity reduction projects to UK and overseas clients.
Technology forms an integral part of our global solution and we have a PwC suite of project management tools that enable us to deliver successful projects on time.