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:
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.
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.
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