Corporate restructuring also known as business restructuring, whether it’s an operational or financial turnaround, may be a powerful instrument for protecting a company’s value and that of its stakeholders.
There are a variety of methods leaders can sustain value in their firm, from refinancing and cashflow improvements to asset divestiture and liability management.
Organization – wide instability is not a new phenomenon, but it has become more challenging in today’s environment. Organizations are facing an unprecedented array of urgent event-driven issues against a backdrop of increasing uncertainty, ranging from the COVID-19 pandemic, geopolitical uncertainty, cross-border trade restrictions, technology and supply chain disruption, to customer channel changes, liquidity issues, legislative changes, and shareholder activism. In order to create, preserve, and recover value, organizations must be resilient and agile. Corporate restructuring is an action taken by a corporate entity to significantly change its capital structure or operations.
What is corporate restructuring?
Corporate restructuring is the process by which an entity changes its legal structure to ensure the smooth operation of the business. This process is usually carried out when the company faces economic or financial problems. The management of the relevant corporate entities facing financial crises hires financial and legal experts to provide advice and assistance in negotiations and transactions. Usually the relevant entities may consider providing debt financing to interested investors, reducing the scale of the business, or any part of the business. In addition, due to changes in the company’s ownership structure, a company reorganization is required. The changes in the shareholding structure of the above-mentioned companies may be due to unfavorable changes in businesses such as acquisitions, mergers, unfavorable economic conditions, acquisitions, bankruptcies, lack of integration between departments, and over-employment of personnel.
What are types of corporate restructuring?
In general, there are two different forms of corporate reorganization, the reason for the reorganization will determine the type of reorganization and the corporate reorganization strategy.
- Financial Restructuring : Due to unfavorable economic conditions leading to a sharp decline in total sales, this type of restructuring may occur. In this case, the corporate entity may change its capital model, debt repayment schedule, equity holding and cross-holding model. All of these are to maintain the profitability of the market and business.
- Organizational reorganization: It means changes in the organizational structure of the company, such as lowering the hierarchy, redesigning positions, layoffs and changing subordination relationships. This type of reorganization is done to reduce costs and repay outstanding debts in order to continue business operations.
There are various corporate restructuring strategies that vary from organization to organization due to circumstances and different reasons for restructuring. Some of them are:
- Mergers and acquisitions (M&A)
- Reverse merger
- Joint venture
- Strategic alliance
Benefits of corporate restructuring :
The service of restructuring your business will give you a clear focus and a new sense of direction. By establishing a new vision, it will be easier to motivate your teammates and get them to come together under stronger leadership. It helps in:
- Reducing operating costs
- Increasing profits and value
- Focuses and a new sense of direction
- New motivation and morale
- No need to close or sell business
If underperforming companies want to avoid serious damage to their operations and reputation, they must intervene early. Prevention involves quickly determining the correct priorities to protect and increase value.
Among our specific services are:
- Formal debtor, creditor, or court-ordered restructurings
- Cost cutting
- Services for Turnaround and Value Creation
- Strategic business assessments
- Strategy for cash and working capital
- Financial Restructuring
Why Bluebox ?
Our goal is to assist management in navigating periods of significant financial and operational stress without the need for formal insolvency proceedings.
Our work entails assisting management in stabilizing the business, restructure loans, rebuilding performance, improve profitability, and establishing a stable platform for long-term growth. Our restructuring experts bring a wealth of financial, operational, and management experience to the table.