Turbulent economic conditions such as macroeconomic shocks, geopolitical tensions, interest rate hikes, commodity prices or supply chain disruptions may result in otherwise operationally and financially stable and sound businesses experiencing difficulties with cash flows, debt servicing or meeting other financial obligations.

Independent business review (“IBR”) is a detailed assessment of the company’s historical and current financial performance and operations and its business plan projections, conducted by professionals with finance and relevant industry expertise. IBRs are usually initiated by the financing bank(s) or other creditors; however, proactive steps taken by the debtor often speed up the turnaround time and overall negotiations process. It is the first necessary step to stabilize the company financially and operationally and improve its economic outlook. An IBR increases the levels of transparency between the debtor and its creditors, provides a baseline for subsequent negotiation of potential refinancing or payment calendars and fosters cooperation between the stakeholders. 

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Each IBR is unique to the situation and operations of the underlying company; however, it broadly comprises the following stages:

  • Assessment of the historical and current financial performance based on a deep understanding of the business and key drivers;
  • Review of the current financial position, on- and off- balance sheet liabilities and financing terms;
  • Assessment of the company’s business plan and projected cash flows by identifying key assumptions and assessing their reasonableness through historical experience and external benchmarking; or
  • Assistance to management in building a business plan and projected cash flows, if not readily available, including the assessment of underlying assumptions;
  • Preparation of a step-plan, identifying key changes (strategic, commercial, financial) required to be implemented in order to stabilize the business and achieve the business plan;
  • Identification of optimal capital structure and debt servicing capacity based on the business plan;
  • Set-up of tailored financial reporting, improving information flow between the company and its creditors and allowing for enhanced internal controlling;
  • Assessment of options available to the affected stakeholders, support in negotiations.

Following a successful IBR, the financing banks and other creditors gain a greater level of comfort in the company’s operations and financial outlook, and improve their chances of debt repayment. The company benefits from receiving leading insights and advice from an independent expert, often preventing further financial and operational difficulties and risk of insolvency.

Get in touch with our experts to discuss your situation and identify ways in which KPMG can help you overcome your current challenges.

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