The preventive restructuring of businesses refers, in essence, to the reduction of exposure in contractual matters, from the volumes of goods carried on the economic chains to the optimization of investments and, in general, of logistical and operational expenses.

As more and more companies register problems amid declining sales, optimizing the contractual relationship can make the difference between continuing to operate and falling into the traps of financial deadlock, experts from Sierra Quadrant believe.

"Economic recession is the order of the day, even if in many countries it is disguised as inflation. The decrease in sales volume is felt in all fields of activity, and this phenomenon puts pressure especially on small and medium-sized companies, many of them poorly capitalized and dependent of ordinary financial flows. Any wrong step by a business partner can lead to financial problems throughout the economic chain,'' the analysis shows.

Eurozone economic activity stagnated at the end of 2023, narrowly avoiding a recession as firmer growth in Italy and Spain offset a decline in Germany. At the same time, the European Central Bank stated in its latest report that the prospects for a quick recovery are weak, predicting continued weakness in the short term.

Beyond the situation in Western countries, the recession in Great Britain and the worsening of the economic crisis in Germany, the problems tend to intensify in Romania as well, the quoted source states.

According to the data from the National Institute of Statistics, cited in the press release, in the fourth quarter of 2023 Romania recorded an economic decline, and if in the first quarter of 2024 there will be lower results than in Q4 2024, it will mean a technical recession.

"As we warned 2 years ago, business restructuring will become the watchword in Romanian business. There are hundreds of companies that have chosen to prepare their businesses for times of crisis, reduce their exposures and look for backup financial solutions in case necessary. It is good news, from the perspective of limiting a potential negative exposure of Romania to the effects of a potential international crisis, but it is rather bad news for business dynamics, in general. Romania will operate, practically, with the handbrake on the next 2 years, especially in the context of the fiscal uncertainty associated with the year 2025", said Ovidiu Neacșu, Sierra Quadrant coordinating partner.

Analysts recall, in the context, the last report of the National Bank, according to which "against the deteriorating economic outlook, recession still remains a plausible scenario. The risk of energy prices interrupting the downward trajectory of core inflation cannot be excluded, its materialization heavily dependent on winter weather conditions, as well as global economic and political developments.In addition, an intensification of geopolitical risk may occur amid uncertainty regarding the recent conflict in the Middle East, the persistence of the Russian-led war against Ukraine, as well as the ongoing tensions between the United States and China''.

More than 133,000 companies entered into difficulty last year (16,335 companies suspended their activity, 39,031 were dissolved, 71,241 were written off and 6,650 entered insolvency), and the prospects for 2024 do not look good at all.

The ONRC statistics, cited in the analysis, also indicate that the number of delisted companies increased at the beginning of the year by 67%, to 9,251 companies.

In these conditions, Sierra Quadrant estimates that the number of companies with problems could exceed, this year, 150,000, against the background of the negative effects generated by the increase in taxes, the persistence of inflation and the accentuation of the decrease in sales.

In addition, according to the latest survey published by INS at the end of last month, company managers forecast price increases in the manufacturing industry, construction and trade in the next three months, in parallel with the increase in construction activity.

In the face of increasingly accentuated economic risks, many companies have switched to business restructuring, from limiting non-essential expenses for the core business (rents, office costs, purchases of furniture, computer technology, utilities, etc.) to restructuring the portfolio of services/products.

"Beyond the measures to prevent, especially the risk of contagion on the economic chains, it is certain that many of the companies will, unfortunately, reach the bottom of the bag. This especially since inflation returned to growth in January, against the background of the effects generated by the increase in taxes, operational costs in general. It is not excluded that in the next 2 months we will also see high inflation. The first alarm signals have already appeared in the most dynamic sectors of the economy, from commerce to the real estate area. The problems reported by companies such as Vivre, Elefant, Qualis or Nemo Express come to confirm the fragility of the business environment", the aforementioned analysis states.

In this context, Ovidiu Neacsu specifies that investors can avoid insolvency, bankruptcy, blocking of activity if they use the legal instruments at their disposal, such as the restructuring agreement or the preventive arrangement.

An opinion barometer among investors, carried out by Sierra Quadrant at the end of last year, showed that 3 out of 5 respondents (62%) put restructuring and optimization of financial operations as their main objective in 2024.

The reasons cited by entrepreneurs are primarily related to the increase in taxes, mentioned by 67% of them, the decrease in sales (43%), the increase in the financial blockage (41%) and the increase in operational costs (38%).

With over 25 years of experience in the Romanian business environment, Sierra Quadrant is a company specialized in complex administration and liquidation works, characterized by large and diversified assets, by the multitude of legal issues that must be resolved, simultaneously with the insolvency procedure: balance sheet environment, hazardous substances in the property, unclear servitudes and disputes related to heritage, etc.