What is corporate restructuring?
Corporate restructuring is the process whereby financial and legal experts help reorganise a company at a legal, operational or ownership level to improve organisation or profitability.
For an under performing business, corporate restructuring is sometimes the key to keeping the company alive.
Reasons for corporate restructuring can also include:
- A change of ownership
- A merger or acquisition
- A demerger
- Bankruptcy
- Repositioning of the company.
What is involved?
The corporate restructuring process generally involves:
- An initial investigation into the company’s finances to establish whether there is sufficient liquidity for restructuring to take place.
- The creation of new forecasts that predict working capital more accurately.
- Negotiation with key creditors.
- The creation of revised business plans and agreements with creditors.
The process of restructuring will differ according to the needs of the company.
If a company is losing money fast, the focus may be to reduce tensions between the company’s debt and its equity holders in order to reduce financial losses.
If a company is struggling to pay its debts, financial advisers may be called in to restructure the way in which debts are repaid, to ensure creditors are satisfied.
This might involve the creation of a new schedule of debt repayment, or the negotiation of alternative forms of repayment for certain creditors, such as equity in the company in lieu of repayment.
