It is expected for most businesses to face financial troubles over the course of their existence, as a result of either internal or external factors, or a combination of the two. Whether your bottom line has been steadily decreasing due to resource draining inefficiencies and expenses, or if it suddenly took a dip as a result of a market crash or changes in consumer behavior, addressing financial and operational issues swiftly and effectively is necessary if you want to turn things around.

The word restructuring can sound drastic and intimidating, but an effectively planned and well timed corporate restructure doesn’t have to be either of those things. It is important to stress here that restructuring is not reserved solely for businesses facing financial ruin, but should rather be seen as a viable option when a need for change has been identified, if you want to improve your bottom line, or if you want to secure your businesses position in the market for years to come.

In this blog, we’ll be shedding some light on what corporate restructuring is, what restructuring can do for your business, and what forms of restructuring are most effective depending on what kind of change you want to exact. Hopefully, by the end of it you’ll feel more comfortable with the concept of corporate restructuring and your ability to identify the right restructuring strategy for your business.

What is corporate restructuring, exactly?

The most important thing to remember about corporate restructuring is that you’re aiming to improve the efficiency and effectiveness of your organization as a whole. Put simply, corporate restructuring is a decision made by an organization to alter or completely rethink the way their business operates with regards to management, finances, and/or operations. By actively assessing what needs to be altered and strategically implementing change, businesses are able to streamline their processes and improve their financial standing. Essentially, deciding to restructure involves recognizing that the ship has gone off course, having the know-how to effectively plot a new course, and committing to righting the the ship.

So, what usually causes the ship to go off course in the first place? There are factors that are both within and without a business’s control that will impact whether they need to consider a business transformation. Some external factors include: disruptive market entrants, dips or crashes in the market, macroeconomic issues, and changes in consumer behavior. Some factors that are within a business’s control include: the need for digital transformation, resource drains like unnecessary expenses or inefficient processes, and workplace culture inconsistencies.

What kind of corporate restructuring is right for your company?

As mentioned previously, a restructuring doesn’t need to be drastic in order for it to be effective. Sometimes the ship has just gone slightly off course, and if you catch it early enough it is possible to make a big impact with very small operational changes. The more successful restructures will focus on all areas of value creation. However, there are some transformations that focus on one specific thing – like workflow processes, for example switching over to agile methodologies.

So, there are various routes available to any business when committing to a restructure, but the restructuring strategy you go for should be decided on based on what kind of issues you want to address. With that being said, there are two main categories of restructuring that encompass the various routes your business could take when wanting to change course.

1. Financial restructuring
   
   Financial restructuring involves altering the financial structure of the company to address financial distress or to better position the company for future growth. This might include refinancing debt, issuing new equity, selling off non-core assets, or negotiating with creditors. The goal here is to improve the financial health of the company, ensuring it has the necessary resources to achieve its strategic objectives.
   
2. Organizational restructuring
   
   Organizational restructuring focuses on the internal structure of the company. This can involve changes to the company’s hierarchy, reallocation of resources, or redefining roles and responsibilities. The aim is to create a more efficient, agile, and responsive organization that is better equipped to meet its strategic goals. Organizational restructuring can also include adopting new technologies, streamlining operations, and enhancing communication across departments.
   

What can an effective corporate restructuring strategy do for you?

In order for any form of restructuring to be effective, there are a few things that you need to clarify first. Like anything in business, a corporate restructuring needs to be thoroughly planned before it can do anything for you. Design, execution and communication all play an integral part in your restructuring journey.

1. Design
   
   Different kinds of corporate restructuring solve different problems. It is important first and foremost to fully understand what your organization’s fundamental strategic problem or opportunity is. Are your main pain-points coming from your finances? Or have you noticed that your team is not working as efficiently as it could be? Only once you’ve narrowed down what your key problem areas are, are you able to begin thinking about the best way to tackle them.
   
2. Execution
   
   Without a concrete, detailed plan on how you’re going to execute your corporate restructuring, it’s highly likely that it won’t succeed. Successful business restructurings all start with detailed strategies that include trackable, time-bound metrics to measure outcomes. This kind of work usually requires the input of a business turnaround expert, or corporate restructuring consultant.
   
   It is also important to know WHEN to commit to a corporate restructuring. A common mistake is that people wait too late to restructure, which results in the need for drastic change. Preemptive, voluntary restructuring can often be more effective than restructuring only when it’s necessary due to the threat of bankruptcy or hostile takeover.
   
3. Marketing
   
   Selling your restructuring strategy to all of your stakeholders (investors, customers, and employees) is crucial if you want to ensure your restructuring efforts are worth it in the long run. This step is essential because any corporate restructuring with less than a 25% adoption rate will not be successful. You want executive and line management to advocate for the significance of the restructuring and model the changes you’ve decided to make from day one.
   

But when all is said and done, what kind of outcomes can you really expect from a successful restructuring?

Benefits of restructuring

1. Cost Savings
   
   Whether you’ve opted for financial or operational restructuring, cost reductions is one of the most valuable benefits of a restructuring. Streamlining operations, reducing redundancies, and optimizing resource allocation can lead to significant savings and get your organization out of the red.
   
2. Increased efficiency
   
   By addressing inefficiencies within your organization, restructuring can lead to improved processes, faster decision-making, and enhanced overall productivity. And in today’s environment, where things are moving a mile a minute, it’s imperative that your business is running as efficiently as possible.
   
3. Debt reduction
   
   Financial restructuring often focuses on reducing the company’s debt burden, which can improve cash flow and create a more stable financial foundation for future growth. Whether you’re committing to selling off non-core assets or rethinking your equity scheme, making the decision to reduce your debt as an organization can take unnecessary weight off of all of your stakeholders’ shoulders.
   
4. Technology adoption
   
   It goes without saying that these days restructuring strategies often involve adopting new technologies. This not only improves operational efficiency but also ensures your business stays competitive in a rapidly changing market.
   
5. Diversification
   
   Restructuring can also involve diversifying your business operations, allowing you to tap into new markets and reduce your dependence on a single revenue stream.
   

Corporate restructuring is not just a remedy for businesses in distress but a proactive strategy for any organization aiming to enhance efficiency, reduce costs, and secure a competitive edge in an ever-changing market. By understanding the different forms of restructuring and carefully planning your approach, you can transform challenges into opportunities for growth.

At Grudva LLC, we specialize in guiding businesses through these complex business transformations. With our expertise and experience, we help companies navigate the corporate restructuring process smoothly, ensuring that changes lead to sustainable success. Whether you’re facing financial difficulties or seeking to optimize your operations, Grudva LLC is here to support your journey towards a stronger, more resilient business future.