Corporate Restructuring
What is Corporate Restructuring?
Corporate restructuring is the process through which a corporate entity modifies the structure of a firm’s business portfolio to increase profitability. It entails implementing substantial structural changes to remove bottlenecks and other issues and boost the organization’s overall performance.
Why do you need Corporate Restructuring?
Consultancy services for corporate restructuring include company restructuring and corporate financial restructuring, commonly referred to as holding structure changes. By altering the holding structure, the current structure—which would have grown over time as the business expanded and the promoters continued to pursue new commercial endeavours within the group—must be made simpler. Because of the dynamic nature of the business world, the ever-changing global environment, and the regular introduction of new laws and policies, the structure eventually becomes somewhat outdated and cannot stand the test of time.
Stakeholder analysis is done in order to understand the long- and short-term goals of the entity’s business vision and plans, segregation versus consolidation of assets, the current tax situation and stakeholder concerns, goals that led to the current business structure, and lament with the current structure.
In order to fully comprehend the structure in terms of the shareholding pattern, the jurisdiction for the registration of existing business entities, and those companies’ advantages and limits, structure analysis is also carried out. Control and management, risk sharing among various company entities, historical fund flows, and SWOT analysis of the current organisation are all included.
To achieve the most benefits while following the law, the holding structure should be kept as simple as feasible. Reducing the complexity of this holding structure results in lower compliance and transfer costs. A new holding structure may arise via a merger, demerger, reverse merger, lump sale, disinvestment, acquisition, joint venture, or strategic alliance. Any of the aforementioned transactions necessitate a deep comprehension of tax and company regulations. A company’s worth must be determined, and this involves valuing the land, fixed assets, and primary business. A thorough analysis of financial requirements and occurrences involving stamp duty is necessary.
Business restructuring is done to restructure the various businesses that different corporations have operated over the years as they have grown and developed into lucrative enterprises. It’s critical to comprehend the rationale for the introduction of each business line within a given organisation. There are a number of questions that need to be addressed, such as the promoters’ motivation for doing it, whether they simply introduced it because they thought it would be profitable and that starting a new business to implement the new business idea would be challenging, or whether the existing company had the synergies to take on the new business, etc.
How can we help?
Identification and adoption of the principles for corporate restructuring, prioritisation of those principles for restructuring, development of workable structural possibilities, evaluation of structures on various criteria, and selection of a structure are all included in restructuring recommendations.
Our experts assist you in navigating the complexity of a restructuring exercise by creating a turnaround strategy and engaging in streamlining the corporate structure to increase the value it creates for the promoters and other stakeholders. You can view some of the noteworthy credentials we’ve accumulated for corporate restructuring projects on the page below.
FAQs
Corporate restructuring is a strategic process that involves making significant changes to a company’s organizational structure, shareholding structure, operations, or financial setup. It is important for companies seeking to adapt to changing market conditions, enhance efficiency, improve financial performance, or achieve specific strategic objectives.
Corporate restructuring can offer various benefits, including cost savings, improved profitability, increased competitiveness, enhanced flexibility, and the ability to realign resources with strategic goals.
Corporate restructuring can take several forms, such as mergers and acquisitions, divestitures, spin-offs, layoffs, debt restructuring, changes in ownership structure, and changes in business focus (e.g., from product-centric to customer-centric).
Signs that a company may require restructuring include declining financial performance, excess debt, operational inefficiencies, a need for cost reduction, changes in market conditions, or a misalignment between the business and its strategic goals.
The choice of restructuring type depends on the company’s specific challenges, goals, and circumstances. It typically requires a thorough analysis of the current state of the business and a clear understanding of the desired outcomes.
A corporate restructuring consultant or advisor provides expertise and guidance to help companies navigate the complexities of the restructuring process. They offer strategic recommendations, help with planning, and assist in the execution of restructuring initiatives.
The duration of a corporate restructuring process varies widely based on the scope and complexity of the changes involved. It can range from several months to a few years. It’s important to focus on the quality of the process rather than the speed.
Restructuring can have significant implications for employees and stakeholders. It may result in changes in roles and shifts in corporate culture. Effective communication and support are essential to manage these transitions.
Yes, corporate restructuring can be a viable alternative to bankruptcy for financially troubled companies. It allows them to reorganize, reduce debt, and regain financial stability while avoiding the legal process of bankruptcy.
Corporate restructuring often results in changes to financial statements, particularly when it involves asset sales, write-downs, or debt restructuring. It’s crucial to understand and properly disclose these changes in financial reporting.
A company should identify and pen down reasons for undergoing corporate restructuring. Once the problems/ issues are listed, specific clear goals also need to be identified and listed and should be communicated to the Consultant too
Risks include employee morale issues, potential loss of key talent, disruption to operations, and financial uncertainty. These can be mitigated through clear communication, well-managed transitions, and contingency planning.
Yes, recovery is possible with appropriate adjustments and learnings from the failed attempt. It’s essential to reassess the situation, make necessary changes, and implement a revised plan.
To determine the need for restructuring, start by conducting a thorough internal and external analysis. If restructuring is deemed necessary, the first step is to seek expert advice and develop a clear restructuring plan that aligns with your company’s objectives.
We are pleased to present Hmsa’s proven Growth Strategy Approach. Want to know how we can help you grow your business and beat your competition?
