A financial and operational document that demonstrates a company's ability to generate the cash flows needed to sustain operations, service its debts, and create value over the medium term.
Before investing a single euro in a distressed company, one question must be answered with rigour: can this business survive and prosper? The viability plan is the document that answers that question with numbers, not opinions. It is the difference between a well-founded investment and a blind bet — and the first document Blue Mountain analyses when evaluating an opportunity in the special situations segment.
A viability plan is a financial and operational analysis that projects a company’s trajectory over a defined time horizon (typically three to five years), demonstrating that the business is capable of:
A viability plan is not an exercise in optimism or a PowerPoint projection. It is an analytical document that must withstand the scrutiny of creditors, judges, insolvency administrators, and investors. If it cannot hold up under pressure, it serves no purpose.
In debt restructurings. When a company negotiates a refinancing, haircuts, or deferrals with its creditors, those creditors demand a viability plan proving that the business can meet the new payment schedule. Without a credible plan, there is no deal.
In insolvency proceedings. A composition proposal must be accompanied by a viability plan justifying the requested haircuts and deferrals. The insolvency administrator and creditors will evaluate the credibility of the projections before voting.
In investment transactions. When an investor evaluates the acquisition of a distressed company, they build their own independent viability plan. They do not rely on the plan presented by the seller or the debtor — they construct their own assumptions from scratch.
In financing requests. Banks require viability plans when a company seeks financing in non-standard circumstances: restructuring of existing credit lines, new loans for companies with recent losses, or acquisition financing.
A viability plan that Blue Mountain would consider credible includes, at minimum:
Diagnosis of the current situation. A rigorous analysis of the root causes that led the company to its current position: customer losses, margin erosion, over-leveraging, management failures, market shifts. If the diagnosis is not honest, the proposed solutions will be insufficient.
Operational plan. Concrete measures to reverse the situation: cost adjustments, contract renegotiations, team restructuring, changes to the commercial model, divestiture of non-strategic assets. Each measure must be quantified with its estimated impact on the profit and loss statement and an implementation timeline.
Financial projections. Profit and loss, balance sheet, and cash flow projections for three to five years, across three scenarios: base case (most likely), optimistic, and pessimistic. Projections must be consistent with the operational plan — if the plan anticipates a 15% revenue increase, it must explain where those additional revenues will come from.
Sensitivity analysis. What happens if revenues grow 10% instead of the projected 15%? What if margins compress by two percentage points? The plan must show that the company survives even under a reasonable pessimistic scenario. If it is only viable under the optimistic case, it is not viable.
Funding requirements. How much capital the company needs to execute the plan: working capital, investments, debt restructuring. How that capital will be obtained: shareholder contributions, new debt, asset disposals.
Hockey-stick projections. The classic: the first two years are difficult, but from year three everything grows exponentially. Projections that depend on a magical inflection point generate immediate distrust.
Ignoring working capital. A company can be profitable on paper and run out of cash if it does not manage its collections, payments, and inventory properly. Many plans focus on the income statement and forget about cash flow.
Underestimated restructuring costs. Layoffs, closing business lines, renegotiating contracts — everything has a cost. Plans that assume restructuring measures are free are not credible.
No accountability. Who will execute each measure? With what resources? By when? A plan without assigned responsibilities is a statement of intent, not an action plan.
Blue Mountain evaluates a metal components manufacturer in northern Spain that has lost 30% of revenue over two years due to reduced orders from its primary automotive customer. The company has revenue of 14 million, a current negative EBITDA of minus 400,000 euros, financial debt of 5 million, and virtually depleted equity.
Management’s viability plan projects a recovery within 18 months based on diversification into the aerospace sector. Blue Mountain rejects the plan for three reasons: aerospace certifications require 24 to 36 months (not 18), the certification cost is not quantified, and there are no signed contracts or documented pipeline.
Blue Mountain builds its own plan with more conservative assumptions: a reduction in fixed costs by closing one of two plants (annual savings of 800,000 euros), renegotiation of the supply agreement with the main customer (minimum volume guarantee for three years), and gradual development of the aerospace channel over 36 months. The base case projects an EBITDA of 1.2 million by year three, sufficient to service restructured debt of 3 million.
With that plan, Blue Mountain presents an offer: inject 1.5 million in fresh capital, acquire 80% of the company, and negotiate a 40% haircut on existing bank debt. The deal is executed and the company reaches the projected EBITDA in 30 months — two months ahead of schedule.
Ideally, a combined team: company management (who understand the business) supported by external financial advisors (who bring methodological rigour and credibility with third parties). A plan prepared exclusively by management raises suspicion among creditors and investors. A plan prepared exclusively by external advisors may lack genuine knowledge of the business.
They are distinct documents, though they share elements. A business plan is prepared for companies in a growth or creation phase and has a more commercial and strategic focus. A viability plan centres on demonstrating that a distressed company can survive and recover. The rigour required in financial projections and sensitivity analysis is far greater in a viability plan.
It depends on complexity, but in the mid-market, a viability plan prepared by a professional financial advisory firm typically costs between 15,000 and 50,000 euros. It is an investment that pays for itself if the plan enables a successful restructuring or attracts an investor.
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