Restructuring Pitfalls: The Beauty and the Beast

?Once upon a time, there was a young prince cursed by his own mistakes—a spell that could only be broken by true love. Then came Beauty, who helped him through many challenges and broke the curse. In the end, they lived happily ever after.

Now, let’s meet today’s version of that prince: An entity close to bankruptcy, years of bad decisions and poor management have turned it into a struggling giant. The spell haunting it is, of course, poor policies and fiscal negligence. The only way out is a powerful solution—restructuring, the Beauty in this story.

While other paths like liquidation or distressed asset sales exist, they’re often like selling smoke and mirrors. Why? Because mismanaged companies often inflate asset values through questionable accounting practices and over-optimism. On the other hand, this prince has something precious—a growth market and the potential for higher future cash flows. That’s why restructuring looks so irresistible.

But beware, beauty, whilst captivating, has a darker side. Many companies fall for her charm and never quite recover. We will unmask the hidden face of restructuring and explore five key pitfalls that could turn this love story into a cautionary tale:

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1. The “Unhappily Ever After” Syndrome

Too often, companies fall in love with restructuring and forget to move on. They get stuck in a firefighting mindset, constantly solving problems instead of building systems to prevent them. But you can’t live in a perpetual state of emergency. At some point, you need to shift gears, focus on stability, and create processes for sustainable growth.

2. The “All Costs Are One-Off” Illusion

During restructuring, everything is labelled as “non-recurring” or “one-off.” But once the dust settles, investments and overheads don’t magically disappear. Here’s the trap: management often treats post-restructuring costs the same way, ignoring the reality of ongoing expenses. Investors, take note: not every “one-off” expense is truly exceptional. Dig deep into EBITDA adjustments and look for the fine print.

3. Consultants’ Paradise

In heavily mismanaged companies, consultants often run the entire show—from planning to execution. While their expertise is invaluable, internal capacity building often takes a backseat. Once the consultants leave, the company may find itself stranded, lacking the skills to sustain progress. For investors, this means factoring in future consultant fees as part of your cost analysis—because some of that revenue might go towards maintenance, not growth.

4. Mental Health on the Back Burner

Restructuring is no walk in the park, and employees often bear the brunt of it. Those who survive the turmoil carry scars from the trauma. Unfortunately, mental health is rarely prioritized during such times. Without resources to address employee well-being, companies risk a burnt-out workforce—a hidden cost that can haunt them for years.

5. Culture on the Chopping Block

When survival is the goal, culture often takes a hit. Toxic traits flourish as the focus shifts to grinding it out and hitting the exit at the top. But what about long-term growth and sustainability? Investors, ask yourselves: does the company’s cultural ethos align with your philosophy? If not, can you live with it?

The Moral of the Story

This isn’t about discouraging investment in restructuring—it’s a call to caution. In today’s world, corporate greed and mismanagement are unlikely to go away. Restructuring will continue to provide opportunities for distressed asset investors and lucrative paydays for professionals. But the lesson here is simple: do your due diligence.

Because when the prince meets Beauty, it’s not always a happily ever after. Sometimes, it’s just the beginning of another tale—one you’ll want to read carefully before turning the page.