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Corporate Restructuring
Hi,
I would like to ask what everybody understands by the term "Corporate Restructuring". To me, I see it as an overlap of many areas of corporate finance, such as M&A. A company may evaluate its assets and decide to divest some of them, which may be a business division or subsidiary. As such, this would involve having to find the appropriate buyers, thus M&A.
Another aspect which I think it encompasses, would be the refinancing of debt, which would involve a Company having to decide whether it should repay its debt obligations or renew its loan facilities.
Could I please ask what else corporate structuring might involve and whether I have the correct perspective on this area of Corporate Finance?
Thank you
I would like to ask what everybody understands by the term "Corporate Restructuring". To me, I see it as an overlap of many areas of corporate finance, such as M&A. A company may evaluate its assets and decide to divest some of them, which may be a business division or subsidiary. As such, this would involve having to find the appropriate buyers, thus M&A.
Another aspect which I think it encompasses, would be the refinancing of debt, which would involve a Company having to decide whether it should repay its debt obligations or renew its loan facilities.
Could I please ask what else corporate structuring might involve and whether I have the correct perspective on this area of Corporate Finance?
Thank you
Views: 72
Replies to This Discussion
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Permalink Reply by Werner Reisacher on -
Based on my experience, the term "Corporate Restructuring" is used in connection with companies changing their corporate business strategies and/or re-engineering their operational structures rather than changes in their financial structures. Downsizing of the business, shut down and/or spin-off of some business segments, restructuring the management reporting structures to reduce cost and improve efficiencies, and centralization and/or amalgamation of decentralized activities fall under this category.
Werner Reisacher
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Permalink Reply by Vitun Sharma on -
Hello
Corporate restructuring is necessary when a company needs to improve its efficiency and profitability and it requires expert corporate management. A corporate restructuring strategy involves the dismantling and rebuilding of areas within an organization that need special attention from the management and CEO.
The process of corporate restructuring often occurs after buy-outs, corporate acquisitions, takeovers or bankruptcy. It can involve a significant movement of an organization’s liabilities or assets.
Hope this help
Thanks
Business Analysis
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Permalink Reply by Hassan Farooq on
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would also include operational re-structuring: ensuring working capital mngt, building rolling thirteen week cashflow forecasts - essentially cash preservation strategies and efficient wc mngt; also areas like org design, looking at departmental inefficiencies; re-vamping IT systems, cost reduction - hope u get the gist; cheers
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Permalink Reply by Jonathan Lim on
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Thanks Vitun and Hassan... Your answers have been most helpful!
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Permalink Reply by Sachidanand (Sacha) Singh on -
Restructuring means the process of giving another structure. And by structure of any system what is generally meant is the sub-systems it has and their inter-se relationship. Thus restructuring any system implies changing its sub-systems or their relationship.
By this definition capital restructuring would mean changes in the various types of capital a firm is using.
A corporation is a complex system. It has many sub systems - different subsidiaries, different business units, different management tiers, different types of capital etc. Effecting changes in any of the sub-system should qualify to be called corporate restructuring.
Having said that, we must also recognize the prevalent usage. Corporate restructuring is generally used when a firm gets rid of one or more business unit(s); and when the holding company - subsidiary companies relationship is affected; and occasionally when the management structure is changed; an example - jurisdiction of London office is expanded to cover Northern Europe and all unis / offices in Northern Europe instead of reporting directly to Corporate Office in Timbuktu shall now report to London office.
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Permalink Reply by haresh shah on
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Corporate Restructuring also includes Restructuring of your liabilities side like rightsizing of balance sheet i.e. Say write off paid up capital to the extent of permanent losses incurred by the company so that paid up capital si in line with the real capital employed in the current business. this may be done to take care of losses of discontinued business. It may be done by converting part of the debt into equity or preference shares or have some arrangements with the creditors to sacrifice part of the debt so that business becomes sustainable in future . in exactly reverse situation when the company is flush with funds which can not be efficiently utilised by its business, it can refund such surplus cash by way of buyback of shares.
Indian company law recognizes all such arrangements with creditors and shareholders and provide for single window clearance
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Permalink Reply by Florin Stanciu on -
Opportunities for corporate restructuring could be identified at the operational level, financial, and strategic level. They can be performed in isolation but most of the time is a combination of them. Operational restructuring, in short, refers to realign the cost to the new level of revenues through various methods. Financial restructuring encompass ways of managing better the working capital, negotiation of outstanding of your supplier, fresh money, re-finance existing debts, etc. The strategical one may refers to re-positioning, divesting, M&A, etc.
hope it helps,
Florin Stanciu
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Permalink Reply by Stephen Aldridge on
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Restructuring is a very broad term and is used (maybe not strictly correctly) for any kind of change to the status quo - ie not just 'structures' but also practices. Restructuring should have a clear objective (eg reduced cost, greater profitability, more flexibility, reduced tax liability) - it is important to forecast the alternative scenarios to see whether the objective is achieved - we do a lot of modelling for companies who are considering all the types of restructuring mentioned, to evaluate the likely benefits of the change and the associated risks.
More recently, a key driver has been the need to reduce overhead, in some cases in distressed situations, or because a company forecasts a breach in it's covenants.
Stephen Aldridge
www.numeritas.co.uk
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Permalink Reply by ted stokes on
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Corporate Restructuring involves all of what the other responders have stated.
There are different levels of Corporate Restructuring.
Some, as stated before , are those that are looking to change their business model to maybe look at a different market sector to build more potential revenue.
Others maybe looking to eother divest or buy other companies in order to build a stronger revenue base or Balance Sheet.
Still others, and the arena I work in, is when a compny finds itself in a position where it needs a complete turnaround effort.
The last being the most difficult for a number of reasons.
I hope this helps - not technical but just from a busniess overview position so you can see the differnt types and levels
Ted Stokes
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Permalink Reply by Ashrup R Din on -
Corporate restructuring (CS) is an exercise undertake after an internal DD is done. It starts by crafting a very structured document with specific heading such as: core business , subsidiary business and business environment landscape directions (included in this are such things as technological changes, competition etc. ).
From this it will flow on to the macro and micro aspects of the company. By macro aspect I mean non management levels and policies etc) and at micro level it will be as some of the suggestions below.
What ever it is it has to have a very structured framework before the exercise is carried out.
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Permalink Reply by Wee Keng Yip on
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I believe you got it pretty covered there.
Nevertheless through my understanding, corporate restructuring entails the reorganisation of a group of companies/ company of its core business, capital structure, corporate structure or etc. In Corporate Finance, corporate restructuring may involve a collective exercise/ transactions which may involve changes in the companies operational structure, changes in capital structure (i.e. via debt/ equity/ hybrid fund raising) and a business process re-engineering. The corporate exercise is often undertaken by distress companies or companies going through a diversement/ acquisition exercise.
Simple corporate restructuring exercises could simply involved changes in its capital structure, balance sheet restructuring or simply a change in its operational structure.
Hope the above help.
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Permalink Reply by Dave Sanders on
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I have been through a couple restructurings with divisions of fortune 500 companies and they differ depending on the decisions of the board and many other factors that make each restructuring unique.
The key factors are usually the strategic direction that the company wants to pursue and management's ability to get there. In considering this there are two directions that are often in opposition to each other in terms of allocation of resources and capital deployment: towards the market and towards the shareholder or ownership.
Risk assessments of the financial condition of the company are the tip of the iceberg and usually lead to infrastructual changes that are hoped to achieve the desired objectives.
Often there is a Six Sigma effort or some other re-engineering, software introduction such as SAP, or an ERP solution that is identified and becomes the driver of the financials and overall corporate performance
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