Companies weigh big changes after a time of turmoil

On Behalf of | Jul 9, 2021 | Corporate Finance and Restructuring |

The economic turmoil of the past year and a half has been hard on everyone. It now looks like things are stabilizing, but many find it hard getting back to normal. This is true for many businesses as well as individuals. Some business analysts predict that many companies will seek to restructure themselves as they adapt to changes in the workforce, the marketplace and the business environment.

There are thousands of ways to restructure a company, but two main categories are financial restructuring and organizational restructuring.

Financial restructuring

Financial restructuring typically involves restructuring the company’s debt. For instance, a company might choose to restructure its debts to take advantage of lowered interest rates. In other cases, this type of restructuring comes as part of a more thorough financial overhaul, as when a company goes through Chapter 11 bankruptcy. Either way, the process can be difficult, but is often the best way to ensure a company’s continued survival in an increasingly difficult business environment.

Organizational restructuring

Organizational restructuring is a broad category that encompasses mergers and acquisitions, divestitures. joint ventures, strategic alliances with other companies and more. Like financial restructuring, these are ways to save money, and can ensure the company’s survival.

Executing these moves are often more straightforward than financial restructuring, but it can often be legally and technically complicated and disruptive to business operations and the job security of employees.

Reverse merger

One form of organizational restructuring that can make a big difference for small-to-medium-sized companies is a reverse merger. Essentially, this is a way for a privately owned company to go public without the time and cost of going through the initial public offering process. Instead, the company purchases a controlling share in a publicly traded corporation.

Publicly traded companies can typically raise capital more quickly than privately owned companies. The public corporation also has distinct advantages over privately owned companies regarding taxes and other issues. However, it takes time and capital to go through the reverse merger process, which means it may take a while before the move pays off for a company.

Valuation and advice

One of the first steps in any type of corporate restructuring is to determine the real value of the company’s assets and debts. The best way to achieve this is through valuation, with the help of professionals. Skilled business lawyers can arrange the valuation and give informed advice on the best ways to restore a company’s health.

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