Acquisitions, mergers, sales, company restructuring, tax and legal structuring… These are only a few examples of activities that many businesses have to carry out. These are demanding strategic decisions even in standard circumstances, but what if the company is also in financial distress? In such situations, expert help is key. One of such experts is Jan Dudík, a Deloitte Legal lawyer who specialises in mergers and acquisitions in relation to distressed companies. What is his job like and what is interesting about this field of M&A? These are some of the questions we asked in our interview.
Hi Jan, tell us a little bit about yourself. How long have you been working in Deloitte Legal?
I have been with Deloitte Legal for close to four years now. I joined the M&A team led by Petr Suchý shortly after graduating from the Charles University here in Prague. Before that, I spent several years working for a Prague branch of an established Czech law firm. From the very beginning here in Deloitte, I have been specializing in acquisitions and sales of companies and corporate assets. During the years, I have also had the opportunity to participate in several distressed restructuring transactions, which was a great experience that awoke my interest in the problematics of distressed capital. So I was delighted to join the newly formed Restructuring & Insolvency team, led by Tomáš Brožek and Michal Buchta, a few months ago.
What is it that you personally find interesting in working in the area of distressed M&A?
There are many interesting aspects to transactions concerning distressed assets and the insolvency proceedings in general. Distressed projects usually involve a lot of interested parties and I like that we have the manpower and the capability to help all of them. Whether we are helping troubled companies restructure their business, assist in negotiations with the banks, advise foreign and local investors in negotiating and implementing sophisticated acquisitions, or consult insolvency trustees on complex legal issues.
Perhaps the most interesting thing about working in the area of distressed M&A is that we, Deloitte, can actually make a big difference by helping distressed businesses overcome their financial difficulties. We can save jobs by connecting worried business owners with potential investors, bring about fresh know how, negotiate terms with concerned creditors or simply arrange for a convenient solution of their short term liquidity problems.
Thus giving them a new chance to continue operations, which are often halted by just one bad decision, or an unforeseen event like the Covid 19 pandemic. Because very often this means that the business itself or the idea behind is not bad. It just needs a little professional guidance, a new partner or gentle push in the right direction. I like to think that in a way, we are not only preserving values, but creating them.
But personally, I could imagine that it could be quite challenging to deal with companies in trouble, and with executives trying to keep their enterprises afloat. Isn’t this quite stressful work?
The job can definitely get quite stressful at times. You must remember that we come to their aid in times when the executives cannot be certain as to whether their company will continue operating, whether they will need to layoff half of their employees, or even commence insolvency proceedings this can be quite difficult to face, especially after so many fruitful years and the hard work invested in the firm. It puts a lot of stress on them and naturally, it can project to our work as well. This is where we must be patient and stay confident that with our help the companies can make the best out of a bad situation. Because, although it can be stressful, the reward of doing a good job, and really helping a company, is great indeed.
Still, there are two sides to this, aren’t there? We can consider distressed M&A not only from the perspective of the companies in trouble, but also from the potential investors. How are distressed assets actually interesting for investors compared to regular M&A transactions?
Naturally, troubled companies represent attractive investment targets. Investing in distressed assets and companies in financial difficulties can be an interesting way of extending the investor’s portfolio for a reasonable price. In a regular M&A transaction, an investor is quite likely to spend a lot of time negotiating a rather complex deal, balanced in terms of the purchase price as well as the acquired business, not always knowing about all its skeletons in the closet. However, acquiring, let’s say the assets of a bankrupt company means acquiring assets that have been stripped of their liabilities and encumbrances. What is also interesting is that an investor looking to purchase distressed assets needs not acquire the whole company either – their negotiation position often allows them to cherry-pick those assets that are of most interest to them. Our team can assist these investors in analyzing the target, in negotiations with the current creditors, or doing leveraged negotiation focused on the entry position to the targeted company.
Why should companies work specifically with the Restructuring & Insolvency team at Deloitte?
The various departments at Deloitte allow us to grasp the different aspects that come into play when dealing with distressed M&A. Perhaps the biggest competitive advantage of Deloitte is that we can offer truly integrated holistic solutions that are not only dealing with the legal issues, but covering tax, financial advisory, consulting, and other aspects of the deal. When dealing with distressed M&A, it would be impractical to only look at this from the legal point of view. It is very important to have a good understanding of the financial aspect and tax consequences as well. It can save our clients a lot of time and effort, and more often than not, nerves.
What would you suggest be the next steps for any interested readers?
Well, I think that time is of the essence when we look at this from the perspective of the companies. The more time we have before issues become critical, the better the solutions can be. From the perspective of investors, I think that they can rest assured that Deloitte, simply due to its large network of contacts, has the best oversight of opportunities on the market. In both cases, whether for companies or for investors, having an initial discussion as soon as possible would be a good step.
Is your company facing challenging times and are you considering important transactions or restructuring steps? If so, do not hesitate to contact our experts from the Deloitte M&A team who will be happy to help.