Business Restructuring and Restart: A Need for Change in the Business Structure

If companies need to modify and reshape their operations, a business restructuring and restart is an essential process. With the intention of reviving a business, increasing a company’s market value, reducing debt, increasing the efficiency of business functions, improving the business going forward, and gaining a competitive advantage, companies are interested to restructure their businesses. In this article, let’s look at the benefits and types of business restructuring in detail.

Benefits of Business Restructuring
Because of a number of benefits, companies in all forms are interested to restructure and restart their businesses. In this competitive business world, after the rising number of new technologies blooming here and there, it is essential for every company to often restructure their businesses. This pertains to re-organizing the control structure of businesses in order to become more profitable, make advanced processes, and be able to adapt to the fluctuating needs of your business. A smart restructuring will bring the following benefits and advantages to the company. Let’s see a few of them here below.

  • Debt reduction to accelerate the growth
  • Cost reduction to generate more revenues
  • Reduced risks to handling any crisis
  • Increase efficiency for every business function
  • Prevent and resolve shareholder disputes
  • Improved tax-efficiency
  • Improve focus on key products or accounts
  • Enable incorporation of new technology
  • Better use of talent for improving business functions
  • Better succession
  • Assets relocation
  • Gain new competitive advantages
  • Better positioning for growth
  • Rejuvenate and revive business
  • Increase the company’s value to overcome competitors
  • Better prepared for sales and marketing
  • Better survival now and in the future
  • Limit financial harm

Types of Business Restructuring
There are different types of business restructuring processes. Here are some of them.

Merger is a process of combining two or more corporate entities in which the assets and liabilities of the entities are moved to one, which continues to exist, while the remaining stop existing.   In this form of business restructuring to advance business from one level to another level, the companies can enter into a merger agreement, in which companies decide the terms and conditions of the merging process. Generally, companies that want to expand their business operations globally are interested in adopting this type of strategy since it is highly helpful for them to go global. A merger or amalgamation of a company with a foreign company is a revolutionary concept in business since a company wants to explore another country with new business functions. There are different forms of mergers such as:

  1. Horizontal Merger– It is a merger process in which a merger happens between two companies generating the same levels of production. This type of merger can help a company to increase its competitive advantage. For example, if Company A sells products similar to Company B, the joint sales of a horizontal merger will give the new company more share of the market. 
  2. Vertical Merger– It is a merger process in which a merger happens between two companies generating different phases of the production cycle. This form of merger delivers a strategic tool for companies to develop their businesses and obtain more control over the steps supporting the supply chain.  
  3. Conglomerate Merger– Conglomerate merger is a merging process in which merging happens between companies in different types of businesses with unrelated business activities. Common advantages of this type of merger are diversification, cross-selling products, and investment opportunity.
  4. Cash Merger–  A cash merger is a process in which one of the companies purchases the other company for merging. One of the main benefits of this type of merger is that the new owner can quickly achieve all the assets of the acquired business, without the requirement of converting new stocks or using other ways to prepare those assets for any preferred use. 

Private Acquisitions
It is a process in which a company acquires another company leading to consolidation or merger with the parent company. Private acquisitions generally happen because of increased benefits such as synergies, economies of scale, and economies of scope. There are two types of private acquisitions such as:

This is referred to as a share sale. In this process, the buyer acquires the entire or portion of the share capital of the target organization. When a company is acquired as a result of a share sale, every asset and liability is transferred to the buyer.

This is referred to as an asset sale. In this process, the buyer has the benefit of acquiring a particular asset instead of its stock. One of the best advantages of an asset sale is the buyer can get rid of the liabilities with the seller and only purchase the specific assets of the company.

It is one of the forms of business restructuring in which a company divides into two separate groups either to function independently or to be sold. De-merger permits large companies such as conglomerates to split their numerous business units to encourage or hinder an acquisition, and to increase capital by selling off components that are not part anymore of the product line.   After this process, companies are divided into different entities and enjoy the business functions separately. A company demerges for decreasing the financial burden, creating new business functions, and other reasons. In many cases, companies take a demerger strategy to create stock market value. Investors will have more visibility to make better investing decisions over the business functions.

Strategic Partnership
Strategic partnership is one of the most fundamental approaches to restructuring any business. Here, partners remain independent, share their benefits, take risks, have joint actions and continue to contribute in strategic areas.  As it is vital to the growth of any business, companies make use of the principle of a strategic partnership to improve business functions, generate more revenues, increase market capitalization, and expand business operations. The power of partnerships in business reveals itself in several forms, ranging from cooperation to investing in a project to sharing business intelligence and goals between companies.

With the right partnerships, companies can improve their business concept and increase their market capitalization. Strategic alliances can provide common benefits such as cost reduction, technology sharing, product development, market access, etc. And also, partnerships between businesses foster collaboration and longevity in firms and provide better solutions to society since companies can blend some of the best services to introduce innovative products and services.

Are you looking for the ideal organizational restructuring, management structuring, and financial restructuring for your company? The entire business restructuring is a good option since it can improve profitability, cash flow, business strategy, and rebranding. And also, it will improve communication and decision-making to improve sales and marketing.

If you are considering restructuring your business, having the right strategic business restructuring is a great way to start. As a comprehensive business solution provider, Dhunicorn will be the right partner in your business reshaping process. Find out more @ about how we can help you to implement strategic restructuring to achieve your targeted business objectives.