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When an insolvency administrator comes to the company, it is usually already ablaze. The employees have already noticed weeks or months ago that something is going wrong and fear for their future. But no company gets into insolvency without a reason. Often, performance-related problems have not been eliminated for years.
For the insolvency administrator, the task now is to mobilize forces and motivate employees. In order to keep customers satisfied, the quality and delivery reliability must be at least as high as outside the insolvency proceedings. No manufacturer will permanently commission an insolvent company out of pity. This is particularly difficult in production. Here, in particular, experienced interim managers are needed to avoid a high level of sick leave or to prevent acts of sabotage in production.
What role does the insolvency administrator play? Why does it make sense to work with external consultants and what skills do interim managers need to have? How can staff be motivated and both quality and delivery reliability for customers be maintained? We talk about this with Detlef Specovius, lawyer and specialist in insolvency law at Schultze & Braun.
The decision was already made during my traineeship. At that time, I was working for a lawyer in the field, so to speak. I realized relatively quickly that this business is not what I want to do all my life. If law, then always with reference to business administration. That was what one could do best in the industry - at that time it was still called bankruptcy trustee. I then applied for a training position as a bankruptcy lawyer in response to a box number advertisement in the NJW, i.e. the magazine "Neue Juristische Wochenschrift". Then I came to Achern and thought I would do that for two years. In the meantime, I've been in the job for 28 years.
I had enough to do two, three months ago. During the last two years, I had some proceedings or some mandates that were quite time-consuming. Whether that's Condor, Bonita, or Pressmetall. And since these mandates - with the exception of Pressmetall, which is still ongoing - have been settled, it has become extremely quiet. On the one hand, this is certainly due to the suspension of the obligation to file for insolvency. But what is surprising is that after the suspension was lifted, there was no wave of insolvencies, as many had hoped, believed or feared. And there are no signs that this will change any time soon. There is obviously still enough money in the market. The banks are also keeping their feet still at the moment. Accordingly, the companies do not see any need to file for insolvency at the moment, although they might be obliged to do so, at least for restructuring reasons.
A company does not get into insolvency without a reason. Often, it has had performance problems and has not eliminated them over the past months or even years. If you then come into a company as an insolvency administrator, you are not suddenly an expert in the field of casting, textile processing, textile finishing or automotive suppliers by virtue of the fact that you have been appointed as administrator. As an insolvency administrator, you have a certain legal toolbox that you can use. You may also have a certain amount of industry experience in one case or another, but you can't delve into the depths of production the way a specialist can. But I have the problems and I have a certain period of time to bridge the gap, for example through the insolvency money. This gives me the opportunity to work without personnel costs for the time being. However, as soon as I go into the opened proceedings and have to calculate under full costs again, this leads to the fact that the company, which was already loss-making before, then also works loss-making. In other words, there is a risk that I will destroy mass there. Justifiably, no creditor likes to see that.
It is never possible to predict exactly how quickly an M&A process will succeed, if it succeeds at all. So how long does the company have to carry on under its own responsibility? There is a risk that I will excessively use up the "bacon" that I have "eaten" during the preliminary insolvency proceedings. That's why it makes sense to have external experts on board from day one. They recognize relatively quickly where the company's problems lie. Where can and must you start to make the company profitable again? On the one hand, there are very short-term measures, while other measures only take effect on the time axis. In that case, I have to check whether the company will make it by then. Otherwise, as bitter as it is, I have to tell the creditors' committee or the creditor that we have to shut down the business. Because we can't operate profitably, nor will anyone finance our losses. That is one reason.
The other reason is that I have to ensure that the quality remains the same or perhaps even improves in the opened proceedings. After all, we had a completely different mandate together. There, neither the quality nor the timing from order entry to production was right. It took far too long and the customers were no longer prepared to accept that. However, the company was not able to shorten the production time because the employees had been working like this for 20 years. The fact that times have changed was not recognized there.
We have the peculiarity that in a distressed M&A situation, insolvency or restructuring, we encounter employees who have noticed for weeks or months that something is going wrong. This naturally brings up fears. Worries about their jobs, fears about how to continue, how to finance their livelihood. Then the insolvency administrator arrives on the X deadline. First of all, all hopes and wishes are focused on this person. If this person does not deliver, everyone falls into an even deeper hole.
This means that, on the one hand, you have to look very closely at how you can motivate your employees. How can I ensure that they continue to perform, and at best even better than before? Which employees are necessary? Who can I rely on? Are people in certain positions because they were good with the old shareholder or managing director, but are a disaster in terms of expertise and content? It is crucial that I have someone who is constantly on site. To whom the employees can come at any time, because his office door is actually always open. It is important to collect feedback from the workforce. Because they often recognize where the problems are much sooner and better than senior employees. This requires tact and empathy, and the ability to inspire.
Since we have mentioned pressed metal: It becomes extreme, of course, in the situation where production takes place. There it is very difficult to motivate the employees. In other words, to avoid an exorbitantly high level of sick leave or to prevent production from being sabotaged. Interim managers need considerable skills for this.
An important feature in keeping customers happy - because that is ultimately what it is all about - is to supply them with at least the same, if not even better, quality and delivery reliability as outside of insolvency proceedings. After all, customers need the products, and they need them in the quality they are used to.
To stay with pressed metal: No car manufacturer is willing to pay for products of inferior quality. The parts may not be installed. Then the customer is gone faster than you can think. That's why quality and also adherence to delivery dates must not drop in insolvency. No manufacturer will permanently commission an insolvent company purely out of pity. Apart from that, this may also trigger claims for damages, which are mass liabilities after the opening of the proceedings. This can lead to insufficient assets. The creditors' committee asks, justifiably, why poor quality was produced. Why no measures were taken to avoid this. And this is exactly the task of the interim manager or a production manager. He or she ensures that the quality and time specifications are adhered to in production.
That is an important point. In this respect, an Intermin manager needs a certain backbone in order to assert himself. He has to know what the individual customers want. At the beginning of a process, people usually pull at you from all sides: The big customers think they have special rights over the small customers. Also not to be underestimated are the mayor or the district administrator, who suddenly take an interest in the company, which they had never visited before, even though it has been on the market for 30 years. Possibly the next elections are just around the corner and 500 jobs are threatening to disappear. That's what you have to take care of.
Then there are the suppliers, who are angry because they suffer a breakdown but have to continue delivering. There are the employees, the unions and the works councils, who are of course all now, quite rightly, trying to assert their rights. Everyone is tugging and pulling at the interim manager and the administrator.
Last but not least, there are the banks that regularly want to know how things stand. They don't go to the creditors' committee because they have no interest in it, but they still want to be informed. And the creditors' committee is not always easy to look after either. Balancing all that. That is the task of the Intermin Managing Director, in addition to his professional skills and abilities.
That can work well, but I prefer everything from a single source. Then I only have one contact person, the project manager. As soon as something doesn't suit me or something needs to be clarified, I discuss it with him directly. I don't have to go to another production manager and purchasing manager, because that's the project manager's job. I also don't want to "rule" into that. I expect the project manager to put the people into my company whose skills he is convinced of. And if it doesn't work out, I talk to him directly. It's no different in our field.
The creditors' committees are becoming more cost-sensitive, that is true. You have to make it clear what the benefit of the consultant is and what the requirement profile is. I'm not going to bring in ten consultants to make mischief and burn money. The company is not in this position for nothing. If there are problems in production, I have to start there or the quality problems will continue in the process - with the result that at some point the mass insufficiency will occur.
Another argument is to decorate the "bride" first, so to speak, so that she can be sold at all. At the beginning of the process, perhaps no investor will get on board because there are so many problems that need to be solved. I have then, if necessary, also the possibility to make the enterprise so profitable that I can continue a period of one or two years more and more often in proceedings, because at the moment the market for a project is bad. But the way, it may improve. If I manage to run the company profitably, I don't have to stop business operations. Maybe then, two years after Corona, I will start a new sales process, which is unsuccessful at the present time. Understandably, every company is holding its money together right now and is therefore out of the question as a strategic investor for the time being.