Restructuring and advisory work is an increasingly important focus for professionals who advise insolvent businesses, according to a survey by insolvency and restructuring trade body R3. A large majority (68%) of respondents said that demand for advisory work had increased in recent years, with over half saying this is because awareness of business rescue options has increased, or creditors or debtors want to avoid statutory insolvency proceedings,
Statutory insolvency work is still of vital importance to restructuring teams, however. Such work takes up around three-fifths of practices’ time and delivers an average of around two-thirds of practices’ revenues.
Insolvency training stands teams and individuals in good stead when undertaking advisory work, the survey found, with 77% saying it is advantageous to have such training when discussing potential assignments with clients, and under one in ten (8%) reporting it as a disadvantage. A background in insolvency is also helpful when actually carrying out advisory work, according to an overwhelming 90% of respondents, with no one at all calling it a disadvantage.
Andrew Tate, R3 president, commented “Even as the business environment for insolvency and restructuring work changes and evolves, professionals with insolvency skills are well-placed to provide support and advice on business rescue and restructuring to the UK’s business community. Statutory insolvency work may remain a fundamental element of the profession’s business model, but our skill-set means we can provide valuable advice in a variety of situations.
“Advisory and restructuring work is a natural fit with an insolvency practitioner’s or insolvency lawyer’s core strengths and professional experience, and R3 members are uniquely placed to offer support to distressed businesses both inside and outside the statutory insolvency regime.”
Advisory work sits happily alongside insolvency appointments, say a majority of survey respondents: 62% say advisory work is complementing formal insolvency work, while just 15% say that advisory work is supplanting formal insolvency work.
The biggest challenge when taking on advisory work is clients not seeking advice soon enough, say an overwhelming 83% of respondents, followed by a lack of awareness of the skills insolvency practitioners can offer (65%) and a resistance to paying fees for advice (61%). Four in ten (39%) cited a lack of protection from creditors when restructuring outside a formal insolvency process, and a quarter (25%) stated that creditor intransigence was a challenge to successful advisory work.
Firms are most likely to offer a combination of financial and operational advisory services (49%); 24% offer only financial advisory services and 6% offer only operational advisory services.
Andrew Tate adds: “Insolvency and restructuring professionals provide a valuable contribution to the business world and to the wider economy, far beyond what might be traditionally expected of us. In these uncertain times, the expertise that we can offer will be more necessary and more valuable to clients than ever.”