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Corporate Restructuring

About This Plan

What Is Restructuring?


Restructuring is the corporate management term used for the act of reorganizing ownership, operational, legal, or other structures of a company for the need of making it more profitable and better developed, and organized.


What is corporate restructuring?


Corporate restructuring plays a vital role in the life of businesses and companies. Companies will pursue corporate restructuring strategies in response to their falling profits, changes in ownership, general market, changes in corporate strategy.


Corporate Restructuring is the process of reorganizing the structure of the organization to fetch more profits from its operations or is best suited to the present situation.


 It is the most complex and fundamental phenomenon that management confronts.


Enhance the company’s performance ad profit: 

To eliminate the entire financial crisis and enhance the company’s performance this process of corporate restructuring is considered very important. Financial and legal experts are hired by the management of concerned corporate entities facing the financial crunches for advisory and assistance in the negotiation and the transaction deals. The concerned entity may look at operations reduction, debt financing, and any portion of the company. Change in the ownership structure of the company is due to the adverse economic conditions, takeover, merger, adverse changes in business such as buyouts, bankruptcy, over-employed personnel, lack of integration between the divisions, etc.


Types of Corporate Restructuring: 


There are two types of corporate restructuring, they are: 


  1. Financial Restructuring: If the company faces a severe fall in overall sales because of the adverse economic conditions this type of restructuring may take place. In this, the corporate entity may alter its equity pattern, the equity holdings, debt-servicing schedule, and cross-holding pattern.
  2. Organizational Restructuring: Organizational Restructuring implies a change in the organizational structure of a company, such as redesigning the job positions, reducing its level of the hierarchy, and changing the reporting relationships, downsizing the employees. This type is done to cut down the cost and to pay off the outstanding debt.

The Major Features of Corporate Restructuring: 


  • Improving the Balance Sheet of the company
  • Staff reduction
  • Changes in corporate management
  • To dispose of the underutilized assets
  • To shift operations that is, moving manufacturing operations to lower-cost locations.
  • To reorganize functions such as marketing, sales, and distribution.
  • To renegotiate labor contracts to reduce overhead.
  • To Reschedule or refinance debt to minimize the interest payments.
  • To Conduct a public relations campaign

Important things to be Considered in Corporate Restructuring Strategies: 


  • Legal and procedural issues
  • Accounting aspects
  • Human and Cultural synergies
  • Valuation and funding
  • Taxation and Stamp duty aspects
  • Competition aspects etc.



How It's Done

Corporate Restructuring Strategies: 


  1. Merger and acquisitions (M&A): In this concept, two or more business entities are merged by way of absorption by forming a new company. The merger of two or more business entities is generally done by the exchange of securities between the target and the acquiring company.
  2. Demerger: Under these, two or more companies are combined into a single company to get the benefit of synergy
  3. Reverse Merger: In this, the unlisted public companies can convert into a listed public company, without opting for IPO (Initial Public offer).
  4. Disinvestment: When an entity sells out or liquidates an asset, it is known as “divestiture”.
  5. Takeover or Acquisition: Under this, the acquiring company takes overall control of the target company.
  6. Joint Venture: Under this, an entity is formed by two or more companies to undertake financial acts together.
  7. Strategic Alliance: Under this, two or more entities enter into an agreement to collaborate with each other to achieve certain objectives.
  8. Slump Sale: Under this, an entity transfers it one or more undertakings for lump sum consideration.


Information Guide

Purpose of Corporate Restructuring: 


To enhance the company’s shareholder value, it should continuously evaluate its:


  1. Portfolio of businesses,
  2. Capital mix,
  3. Ownership &
  4. Asset arrangements to find opportunities to increase the shareholder’s value.
  5. To focus on profitable investment opportunities and asset utilization.
  6. To reorganize less profitable or loss-making businesses/products.


Photo by Andreas Klassen on Unsplash

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