Corporate Restructuring is an act of reorganizing the legal, ownership, operational or other structures of a company for the purpose of making it more profitable, or better organized for its present or future needs. 

The possible reasons are:

  1. Change in the strategy
    • Positioning the company to be more competitive
    • To move in an entirely new direction
  2. Lack of profits
    • When the company or a division(s) is not profitable enough to cover the firm’s cost of capital and cause economic losses.
  3. Reverse synergy
    • When the individual divisions is worth more than the combined unit. 
    • More value may be unlocked from a division. 
  4. Cash flow requirement
    • If the company is facing some difficulty in obtaining finance, selling an asset is a quick approach to raising money and reduce debt. 
  5. Managerial effectiveness
  6. Diversification
  7. More competitive positioning of the firm
  8. Surviving adverse economic climate

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