In the business world, unexpected situations can come at any time. For example, in recent years, the COVID pandemic has put the business world in a totally unwanted, unexpected situation. Many companies are struggling with their financial downfall and they need to restructure their strategic situation which definitely includes finance as well as organisational restructuring. There are various companies offering corporate restructuring consulting, so if you need to turnaround and restructuring consulting you are looking for, them do some research and choose a professional reputed restructuring consulting farm for you.
Corporate Restructuring Consulting – Reasons for Corporate Restructuring:
There can be various reasons that makes a company think about restructuring:
- Bad cash flow
- Too low gross margin.
- Too high operating costs.
- High labour costs
- Bad designed processes
- Unclear role and responsibilities
- Bad financial situation due to pandemic.
- New trends in consumer market
- Downfall in company’s market share due to competition
- New innovations in market
Types of corporate restructuring:
- Financial Restructuring
- Organisational Restructuring
If the company is facing, sharp decline in revenue, then definitely the time has come for financial restructuring. The company can appoint a legal and financial advisor or can go for corporate restructuring consulting both offline and online.
The financial restructuring can be done in many forms. For example, for some organizations, a more lenient debt servicing schedule can be suggested or for some other companies, shift in equities or cross-holding patterns may be necessary to free-up more liquidity. The process is very much dependent on the specifications of the company’s financial situation.
The main tools of financial restructuring can be done in two ways – Out of court and in-court.
Out of court:
The out of court restructuring are definitely less expensive than the in-court ones but it requires unanimous consent from both shareholders and debt-holders. This can be a very difficult process in case the interest of debt-holders and share-holders does not match, which is very common in fact. The tools involved in out of court restructuring includes amendment, asset sale, debt-for debt exchange, debt-for-equity swap, debt repurchase, new financing, sale leaseback, sale of company etc.
If the company and its creditors cannot reach an out of court restructuring model, then they have to pursue for in-court restructuring. It will be more expensive than the out of court restructuring but it offers more scopes for keeping business afloat.
The tools involved in in-court restructuring are chapter 11 restructuring, contract rejection, debtor-in-possession financing, exit financing, section 363 asset sale, section 363 whole company sale etc.
The planning phase of organisational restructuring should have the following key points in their list:
- Smart objective
- Proper budget
- Creation of effective project team
- Full team support
- Proper project tools and procedure
The companies need to turnaround and restructuring consulting also they can obtain from professional service providers both online and offline.
After the planning is done properly, the company should implement and measure the test phase and then should got for final roll out.
So, measure your situation and according take the decision about restructuring model.