Strategic commercial interventions: options and case studies

1. Background and Purpose

Insolvency, the point at which a business is unable to meet its financial obligations, represents an advanced stage of financial distress. However, before reaching this stage businesses often have access to a variety of financial interventions designed to stabilise operations, restructure debt, and ultimately avert bankruptcy. These interventions, range from private refinancing deals and capital investment to government support as well as formal insolvency proceedings.

This paper outlines the spectrum of financial interventions available to distressed businesses, as part of a response to promoting long-term business recovery. The type of intervention is important, but a long-term successful outcome will always be challenging as, by their nature, distressed businesses present higher risks to investors. There are also various external factors which are beyond the control of investors such as the interplay between various stakeholders, including creditors, investors, and regulators.

Despite the uncertainties and complexities of supporting a distressed business, ministers retain the right to be able to intervene where there is a strategic policy rationale. This paper sets out various factors that should be considered when faced with a request to support a distressed business. The paper introduces intervention structures and details case studies of historic interventions made by the Scottish Government to provide a starting point for acquisition and divestment considerations.