Accounting and business advisory firm RSM Richter says owner disputes need urgent resolution during recession

    TORONTO, June 16 /CNW/ - An increasing number of companies are facing
failure in this economy because owner disputes are preventing down-sizing and
other business strategies from being implemented, according to accounting and
business advisory firm RSM Richter.
    Joel Cohen, a partner with RSM Richter, which focuses on serving
mid-to-large size private and public companies from its offices in Toronto,
Montreal and Calgary, says his firm's financial mediation practice is
receiving increasing numbers of calls from lawyers whose client companies want
to avoid   litigation to help resolve their financial and strategic disputes.
    "Before the recession, when revenues were strong, company owners could
afford to postpone tough decisions on inflated salaries or weak business
divisions, but things are different today," says Cohen. "In this recession
timing is critical. Owners need to find a mediator with the financial
expertise to help them resolve their issues and put the company back on
    Cohen said other critical issues that a company can't postpone until the
recession is over include:

    -   An acquisition made after the recession struck last fall is not the
        "bargain" it seemed at the time;
    -   Financial resources are at risk of being depleted before the economy
        turns around; and
    -   The aging or tired CEO needs to be replaced by a person with the
        energy and skills to take the company to the next level in the
        competitive, post-recession landscape.

    "Lengthy legal battles can take a damaging emotional and financial toll
on any business, especially when the parties involved are owner-managed or
family-owned companies. In addition, litigation usually takes more time than
the company has, especially in today's recession," says Cohen. "By attempting
mediation before legal proceedings, legal advisors offer their clients a
better chance at a fast, fair and effective resolution to their issues."

    Mediation examples

    Cohen said the following examples demonstrate the range of financial and
mediation skills necessary to help companies succeed.

    Home furnishings retailer
    A successful home furnishing retail chain decided to begin manufacturing
some of its own products and negotiated an agreement prior to the current
recession to purchase a suitable manufacturing business. After the recession
struck, but before the deal was closed, the manufacturer looked less
attractive - inventory had rapidly grown with returned and unsaleable
products, profit margins had shrunk, and liabilities had increased - and the
retail chain refused to complete the deal. The manufacturer sued to enforce
the sale agreement, contending it would come out of the recession strong and
that its inventory was sound.
    RSM Richter was brought in to mediate the disagreement and prevent a
court battle. The mediator reviewed the documents, interviewed both sides,
considered the impact of the recession and determined appropriate values for
inventory and liabilities based on the terms of the deal. The mediator
encouraged both sides to compromise - the manufacturer agreed that some
inventory had to be written off and that liabilities needed adjusting, while
the purchasing company agreed that its claims and concerns were excessive. The
parties then negotiated a revised price and the deal closed in the midst of
the recession.

    Construction subcontractor
    The company was a victim of its own success and had outgrown the skills
and resources of the owner-managers. Some wanted out, some wanted to continue
cruising in neutral and others wanted to take action to bring the company to
the next level. As mediator, RSM Richter helped identify issues and allowed
frank expression of views. Management and financial deficiencies were
identified and strategies to remedy them were discussed. Eventually a course
of action was agreed upon - and a strategic partner was brought in with the
finances, technology and skills to move the company forward. Some older owners
cashed out while younger owners signed on for the next round of growth.

    Distributor of industrial products
    The family-owned company became paralyzed when the aging father wanted to
retire and let the two sons run the business. One son was outgoing, assertive
and aggressive, while the other was conservative, technical and introverted.
The parents wanted both sons to have equal ownership, compensation and
authority, but extensive mediation by RSM Richter made it clear that this
formula would not work. It was agreed that the success of the business and the
harmony of the family would be best served if one of the sons bought the
shares of the other - and the aggressive son bought the business at a
valuation facilitated by the mediator.

    About RSM Richter

    Entrepreneurs have been the focus of our firm since it was founded in
1926. Today, RSM Richter is the ninth largest independent accounting, business
advisory and consulting firm in Canada. RSM Richter offers a full range of
advisory and consulting services, supported by in-depth industry knowledge and
national and international experience. Strategically located in Calgary,
Montreal and Toronto, RSM Richter is part of a strong international
affiliation covering all major markets around the globe. RSM International is
the 7th largest network of independent accounting and consulting firms in the
world operating from 730 offices in 70 countries. For more information, please

For further information:

For further information: Media contact information: Toronto, Jason
Graham, Argyle Communications, Telephone: (416) 968-7311 ext 229, Email:; Erin Gawne, Telephone: (416) 932-6014,

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