Restructuring & Turnaround in Central and Eastern Europe: Expert Insights

At Valtus Alliance, restructuring is never treated as a one-size-fits-all discipline. Legal frameworks, creditor behavior, labor expectations, and management cultures vary significantly across markets.

This is particularly true in Central and Eastern Europe, where many companies operate as foreign-owned subsidiaries within local systems that headquarters may not fully understand.

In this conversation, Joe Poling (President & CRO, Think Consulting, USA) speaks with Bohuslav Lipovsky (Founder, CE Interim) about restructuring realities across Poland, Hungary, Romania, and the Czech Republic.

Bohuslav brings a rare, practical perspective. His experience spans the post-transition restructuring wave in Eastern Europe, corporate restructuring in Germany, and multiple interim CEO mandates in crisis situations, including insolvency environments and high-pressure public cases.

Understanding the CEE Restructuring Landscape

Joe:

How would you describe restructuring in Central and Eastern Europe today?

Bohuslav:

Central and Eastern Europe is not one restructuring market. Poland, Hungary, Romania, and the Czech Republic each have their own legal frameworks, creditor cultures, labor environments, and business habits.

But to really understand restructuring in this region, you need to look at its history.

I started my career during a period when Eastern Europe was still dealing with the consequences of moving from centrally planned economies to market economies. There was a wave of restructurings, insolvencies, ownership changes, and industrial transformations.

Many companies had to learn very quickly what competition, cash discipline, and creditor pressure really meant.

That experience shaped how restructuring is approached today. In this region, it is never just a technical exercise. It touches identity, jobs, local communities, and sometimes even national pride.

Today, the region is far more mature and integrated into European business. But the core requirement has not changed. You still need speed, credibility, and leadership on the ground.

What Makes CEE Different from Western Europe

Joe:

What are the key differences compared to Western Europe?

Bohuslav:

The legal frameworks are more developed than many foreign owners expect. All four countries offer structured ways to address financial distress before complete collapse.

For example, the Czech Republic introduced preventive restructuring in 2023, allowing companies to act before insolvency becomes unavoidable. Poland offers a wide range of restructuring pathways, depending on the situation. Hungary and Romania also provide both formal insolvency procedures and earlier-stage restructuring tools.

So the mechanisms are there.

But the real difference is not the legal system. It is execution.

In Western Europe, restructuring is often highly process-driven. In Central and Eastern Europe, process alone is not enough. You also need to understand how people react.

How local managers communicate bad news, how employees interpret silence and how suppliers respond to delayed payments. And how quickly uncertainty can spread.

From experience, I learned this the hard way. I once took over a group of manufacturing companies that had already gone through insolvency proceedings. Legally, they had been restructured. But the underlying business issues were not solved. Within two years, the group defaulted again.

That confirmed something important for me. Legal restructuring creates breathing space. But only operational restructuring creates a future.

The Most Common Early-Stage Mistake

Joe:

What do companies get wrong early in a crisis?

Bohuslav:

They wait too long. And then they communicate too little.

At the beginning, there is always hope. That one more order will come. That a bank will extend terms. That a shareholder will step in. But restructuring does not wait for people to feel ready.

The problem is that by the time action is forced by banks, suppliers, or employees, the company has already lost control of the timeline.

I have led situations where insolvency became unavoidable. It is one of the most difficult decisions a leader can make, because you know it will affect employees, suppliers, and the company’s reputation.

In one case in Slovakia, the restructuring process triggered national media attention and large trade union strikes. We were trying to save the company, but from the outside it looked like a conflict.

That is the reality. Even when you act responsibly, you may face criticism.

This is why timing matters so much. If you act early, you still have options. If you act late, you are forced into decisions under pressure.

When to Bring in an External Expert

Joe:

When should an external restructuring expert be involved?

Bohuslav:

As soon as the issue becomes structural rather than temporary.

If margins are declining over several months, if working capital is under pressure, if lenders are asking more questions, or if suppliers are tightening terms, that is already the moment.

The role can vary depending on the situation. It may be an interim CEO, CRO, CFO, COO, or a plant leader. But one thing is essential. The mandate must come with real authority.

If the interim leader is only advising, while decisions remain unclear or delayed, the process will not move fast enough. And time is not neutral in restructuring. Every week without action has a cost.

First Step for Foreign Owners in Crisis

Joe:

What should a foreign parent company do first?

Bohuslav:

The first step is a fast and honest diagnostic.

You need to answer three questions very quickly:

Is the business still viable?
What kind of crisis are we facing?
And who still trusts whom?

The third question is often underestimated. In restructuring, numbers matter, but trust determines whether a plan can actually be implemented.

A foreign headquarters should not rely only on internal reports, and it should not send someone who only understands the corporate perspective. You need someone who can connect headquarters expectations with local reality.

That bridge is critical in this region.

The Role of Local Stakeholders

Joe:

How important are local stakeholders?

Bohuslav:

They are extremely important.

Even with clear legal frameworks, outcomes are shaped by how stakeholders behave. Banks, suppliers, employees, customers, and even local institutions can all influence the restructuring process.

A common mistake is assuming that a plan approved at headquarters will automatically work locally. It will not.

It has to be translated into local action, local communication, and local credibility.

And one thing is very clear from experience. Silence is dangerous. If people do not understand what is happening, they create their own version of the story. Once that happens, control becomes much harder

Private Equity and Restructuring in CEE

Joe:

What role does private equity play?

Bohuslav:

Private equity is becoming more active, particularly in underperforming assets, carve-outs, and turnaround situations.

At the same time, the region is still influenced strongly by banks and existing shareholders, especially in mid-market cases.

The opportunity is significant. Many companies have strong technical capabilities, skilled employees, and solid customer relationships. But they often require a different operating model, stronger financial discipline, or a shift in leadership culture.

This is where interim executives create value quickly. They are not there to analyse the situation. They are there to stabilise it and move it forward.

What Makes an Effective Interim Leader

Joe:

What defines a strong restructuring leader in this region?

Bohuslav:

The ability to stand in the middle of pressure without becoming part of the panic.

Financial discipline is essential. But it is not enough. You also need to understand people.

In restructuring, everyone is under pressure. Employees worry about their jobs. Managers worry about their reputation. Banks worry about their exposure. Suppliers worry about being paid.

If you focus only on numbers, you lose people. If you focus only on emotions, you lose control.

The strongest leaders combine calm communication with very firm execution. They can speak to the board, the bank, and the factory floor, all in the same day, and remain credible in each setting.

Restructuring in Manufacturing: A Common Misunderstanding

Joe: What is often misunderstood?

Bohuslav:
Many people think restructuring is mainly about cost cutting.

Cost matters, of course. But if restructuring becomes only a cost-cutting exercise, it can destroy the business.

In manufacturing, you have to understand the entire system. Customers, products, pricing, productivity, quality, supply chain, plant leadership, and investment logic all play a role.

Sometimes the issue is not poor management at the plant level. Sometimes the problem is that the plant has been given the wrong product mix or unrealistic expectations.

If you reduce costs without fixing the underlying model, the company may look better temporarily. But the crisis will return.