Some restructurings fail for the following reasons: ownership or management refuse to follow the restructuring plan; the organization does not recognize the severity of the crisis; or the business model is flawed and not updated for changes in the market. Additionally, restructurings can fail if the restructuring plan itself is flawed, either due to an ineffective consultant, stakeholders rejecting better proposals, or a focus on finances over business operations. Finally, restructurings are more likely to fail if there is a lack of time to enact changes before problems become too severe.

1. Jon R. Katz, Esq., MBA, JonRKatz@Gmail.com, http://JonRKatz.com, www.linkedin.com/in/JonRKatz
“Why do some restructurings fail?”
“Why do some restructurings fail?” I was recently part of a forum that debated this question, and
although many took part in answering the question, I couldn’t help but notice that we were echoing
many of the same sentiments. Although many participants pursued an Aristotelian approach in asking
what constitutes failure – a valid question in this case, to be sure – of particular note were the more
practical responses, acknowledging the Platonic view that all things can change, including our
perception of them. With a promise not to indulge in any further philosophy, the predominant themes
were as follows:
1) Ownership, management or other stakeholders refuse to abide by the restructuring plan.
This may take several shapes: perhaps the aforementioned people objected to the first restructuring plan
presented to them, or, worse, to the first several restructuring plans that were before them. Alternatively,
the investors and/or managers endured the pain of the restructuring plan that may have placed them on
the track toward solvency but deviated from or quit the plan for a variety of reasons.
2) The organization fails to recognize the severity of the crisis.
When a company decides to restructure, once the restructuring plan has earned the support of investors
and managers (unfortunately, subject to point one, above), it is critical that all parties, including
restructuring consultant, convey to the employees the severity of the situation. To this end, all
employees must learn that there must be immediate and drastic change in the organization, or, in short,
the restructuring will fail and they will be out of work. To restructure is to take on an entirely new way
of doing business – and everyone in the organization must know it.
3) The business model is flawed.
Although this was a common theme in the discussion and separate from the next point, I place the onus
for this issue on the restructuring consultant. A proper restructuring plan will include a thorough
assessment of the business model, including a pursuit for new areas for revenue and for more profitable
areas of business, in light of changes over time in the market and the competition. However,
occasionally external factors render a business model useless and outdated, which is still within the
purview of a restructuring plan, but is a far more intensive effort altogether.
4) The restructuring plan is flawed.
There are several causes for this: the most obvious is that the restructuring consultant failed to compose
an effective plan – perhaps as a result of being too optimistic, perhaps because it was simply ineffective
and business matters did not unfold as planned. Another very real possibility, discussed in point one, is
that stakeholders dismissed the first, presumably more effective, proposals, and instead agreed to a
watered down restructuring plan. And, one commentator pointed out that flawed plans are usually the

2. Jon R. Katz, Esq., MBA, JonRKatz@Gmail.com, http://JonRKatz.com, www.linkedin.com/in/JonRKatz
work of a money-centric financial advisor or an investment banker, rather than a business operator or
restructuring consultant who will consider additional pertinent factors.
5) Lack of time.
It may be human nature to deny failure, or at least to delay the eventual acceptance of (or, more likely,
the rationalization of) failure. Still, with each passing day that stakeholders deny that the company is in
serious trouble and requires the work of an outside restructuring consultant, the closer the company
moves toward complete disrepair and insolvency. A restructuring project may fail because the
company’s problems are too severe – the best medicine in this case is to act as soon as possible and
bring a qualified restructuring professional on board.