Imagine a patient who enters the diagnostician’s office. He consults him, determines the treatment, and after a few months the patient gets better. Only the patient is not a person, but a company, sometimes with thousands of employees.

The “company doctor” consults him, determines his illness and directs his treatment. In most cases, the patient has a blood disorder. The “blood” of companies that irrigates the entire body is money.

Stem cell bank case

The suffering of companies is almost always caused by money, and “company surgeons” are called in to intervene. But success is not 100% guaranteed.

One December evening, representatives of the largest stem cell collection company in Romania woke up with serious problems. There were articles in the local and national press that the stem cell bank was going to have financial difficulties and that it was going to be ordered by the Fisc. The cellular bank occupied 70% of the profile market in Romania, being one of the largest in Europe.

People called the Romanian Association of Accredited Stem Cell Banks (ARBACS) and asked where they could transfer their stem cells that they had paid serious money for.

“Their restructuring lasted only six months. It was the shortest restructuring,” explains CITR CEO Paul Cirlenaru in a conversation with HotNews.

When asked how he did it, Paul Cirlenaru explained to us that luckily it was just a matter of re-drafting the contracts with additional capital, which they did. “It was very important for them that this threat of bankruptcy did not hang over a company with such a sensitive activity,” concludes the CEO of CITR.

When the state gets you into trouble

There was another case, Cirlenaru says, of a top-5 player in the Romanian construction market. “Very often these companies are financed by banks. When interest rates rise and loan rates rise, it is a big problem if the beneficiary – in this case the Romanian state – defaults on its obligations. The company accumulated debts due to these delays in payment by the state, it faced great difficulties with the payments it had to make, so we were called to help them in the restructuring,” says Paul Cirlenaru.

Was it difficult? “There we had to get financing in the amount of 20 million euros to pay off the debts accumulated over time. They had many open, very large vacancies. One way or another, this volume is a big problem in infrastructure construction,” explains the CEO of CITR

“You build, let’s say, fifteen kilometers of the highway, then you have to collect money, which you put into the ground, as the builders say. In short, we had to break this business cycle, isolate the historical debt until it could be restructured, while the company could continue to be financed. It’s quite difficult because any supplier who sees that you’re in trouble will tell you that they’ll stop supplying you because they don’t believe you’ll be able to pay them. It is a lack of confidence in what you see and what you should lead. The central element here was to make sure that during the reorganization period the company remained bankable in order to finance the works in which it was involved,” says Cirlenaru.

Basically, “company doctors” receive their clients either directly from “patients”, people from companies who look at the numbers and notice that something is wrong, or from “owners”. That is, from the side of financiers of companies due to the pressure they create when they see difficulties in returning financing. And when I talk about financiers, I mean primarily banks.

There is also a situation when the enterprise suddenly disintegrates, and the restructuring of the enterprise is ordered by the court.

There are times when a business owner who has left the executive management in the hands of loved ones comes in and says, “Hey, I’m looking down at my company and I have the impression that something is wrong. Help me understand what’s wrong and how we can move the business in the right direction. And there are times when the head of the company comes and says that I have some specific problems that the contractor denies, but he sees that they are there.

Frequent remarks: “I’ve been doing this business for 15 years, you don’t come to teach me how to do it!” or “Have you worked with 1,000 suppliers to know what it’s like?”

Sometimes corporate doctors are objected to by “patients” who are convinced that they know better why they are suffering. Answers like: “I’ve been doing this for 15 years, you’re not coming to teach me how to do it!” or “Have you worked with 1,000 suppliers to know what this is?” are common.

“I’ve always tried to make it clear to both the people on our teams and the entrepreneurs that I’m not going to come in and tell you how to pour concrete or drill for oil or run a hotel. That’s what you’re good at. I am the element in this equation that allows you to access either some legal opportunities or new business models. I’ve always sought outside advice when necessary because you can’t know everything about every industry. You understand that when we ran four insurance companies for several years, we had to learn and bring in outside know-how to explain to us how things were going. And for the people I’ve worked with, it’s very important to understand that I’m not here to make your work better. I am not coming to replace you, I am coming to help and implement these elements of financial supervision, governance, negotiation and market standards from the point of view of lenders and suppliers,” says CITR CEO

Rarely is a business model unsustainable. If you are in the real market, there should be a working model. The case of Gitt

A company that has grown too unsustainably may have to shed many assets to return to its core business.

This is the case of the Ghitta sausage factory from Baia Mare. “They did a very interesting and natural thing. From the production of sausage products, they have expanded to all horizontal branches of the industry, to pig farming, slaughtering, processing, etc., as well as to distribution, including abroad. Apparently, it was a complete business chain. But when they crunched the numbers, something went wrong.

And for some reason, this was also the starting point of our intervention. Along the way, we looked at it and determined that certain segments were underperforming. At the slaughterhouse, their cost of production exceeded the cost of others by approximately 50%. And I helped them recover and continue doing what they were already doing,” Cirlenaru says.

Or a chocolate factory that had ambitions to be on the shelves of all supermarkets in the country. However, after a short time, raw material prices rose and the company had problems paying its bills, so they turned to us for help.

There are failures, and there are many reasons

“Maybe the market’s expectations are not what we want. You create a recovery plan that may take several months. And at this time, an external factor intervenes, a crisis that throws everything up in the air. It’s like keeping a patient alive on machines and someone comes and sticks them in the head. If there is another event, another change in the market, it obviously brings with it problems that are difficult to manage,” says the interlocutor.

Then there may be problems in the field of expectations related to the amounts received from the sale of some assets. This is an area where the market matters a lot because you have certain valuations, you have certain expectations, but it doesn’t happen and the company can’t sustain the difference.

But it also depends on the tool you’re working with. Now we see that we have more scalpels. Before, we only had failure in the classical sense, which was like a rather blunt ax that we tried to work with surgically. Now we also have this preventive treaty which helps us a lot. Of course, we are not at the level of the developed markets of the West, but there are some important steps.

Recently, the state offered companies with difficulties, or “patients with respiratory disorders” to use a preventive contract, and the first 30 companies also used this technique.

“In the last six months, we have seen pressure on companies that are forced to face higher cost of financing or debt defaults that have been in arrears for a very long time, and that have become accustomed to this paradigm. The growing interest of entrepreneurs in new restructuring mechanisms is increasingly noticeable. 30 projects of preventive concordat does not seem like a large number, but for the Romanian economy it is the beginning of a change of thinking. Given the confidential nature of restructuring procedures, we cannot see all open projects, especially restructuring agreements, so we can estimate that the number of companies resorting to restructuring decisions is higher,” Cirlenaru concludes.