14 Jul 2021 Ankit Chadha

Discover 5 Best Corporate Restructuring Strategies Post Pandemic

Corporate Restructuring | TRC Corporate Consulting

With several people impacted by worldwide lockdowns and remote policies, corporations must rethink how they can manage their staff in the post-COVID-19 era. Many organizations now have procedures in place to assist them in adapting to crises of this sort. Within those processes, some have accurate contingency plans.

Some businesses have chosen to deploy ad hoc initiatives to supplement their existing organizational structures. For the foreseeable future, social distancing measures are likely to remain in place. Once the worst of the pandemic has passed, new social distancing measures may keep being reintroduced from time to time. 

Now is the right time to analyze whether your organization's current corporate structures are sustainable and functioning as they should, or it needs corporate restructuring.

Corporate Restructuring and Insolvency 

Corporate restructuring and insolvency is a common thing as many companies may practice corporate restructuring from time to time to align their business’s goal with the dynamic environment. For example, companies may seek corporate restructuring techniques in reaction to declining earnings, broad market or economic pressures and trends, changes in ownership, changes in company strategy, or to boost cash flow, among other reasons.

The goal of restructuring is to maximize a company's performance by lowering costs, eradicating inefficiencies, and improving profits.

Whatever maybe the cause for restructuring, it might be a challenging and time-consuming process which can be successfully carried out by a good assessment of the commercial venture and its constituent parts.

Comprehensive asset analysis may give a blueprint for the financial aspects of corporate restructuring, allowing the merits of restructuring to be maximized. To correctly determine the impact of corporate restructuring strategies, it starts with a thorough grasp of its assets.

This article will help us understand the reasons for restructuring, best corporate restructuring strategies post pandemic and their features, and the need of corporate restructuring.

Need of Corporate Restructuring 

As stated in the beginning, corporate restructuring may be done for a variety of reasons. Still, they all stem from a desire to maximize the use of existing assets while opening up new opportunities. Therefore, to reorganize finances, organization and a few more reasons, there is a need of corporate restructuring: Find below a few of such reasons:

  • Profit Enhancement : If an organization is not appropriately employing its assets to maximize profit, restructuring may be attempted to put it on a more stable financial basis. The corporate strategy that best utilizes the existing resources will define the company's direction in its restructuring.

  • Cash Flow Requirements : The divestiture of unproductive or unprofitable divisions or subsidiaries might offer liquidity that the corporation would otherwise be unable to obtain. The sale of some assets can result in an infusion of cash as well as a decrease in debt (hence the need of corporate debt restructuring), making it easier for the company to obtain financing terms.

  • Changes in the Business Plan : A corporation may decide to remove subsidiaries or divisions that do not correspond with its core strategy and long-term objective and raise funds to assist its advancement. Furthermore, business strategy can be used to enhance tax benefits or increase flexibility.

  • Reverse Synergy : Companies often pursue mergers and acquisitions to establish business synergies, but the contrary is also true. A merged or composite unit's worth might sometimes be lower than the sum of its parts. Some divisions or subsidiaries may be worth more as a separate entity than they are as part of the larger corporation.

Corporate Restructuring Strategies 

The cause determines the ideal corporate restructuring approach for any specific company for the restructuring and the organization's unique circumstances and qualities. Here are five instances of corporate restructuring strategies that are particularly relevant to valuation:

Strategic Alliance : A strategic alliance enables multiple firms to generate business partnerships yet maintain their independence.

Joint Venture A joint venture is when two or more companies unite to establish a new business entity. Private firms agree to provide certain resources and share the costs, profits, and control of the new company formed as a result of the joint venture.

Mergers and Acquisitions : A merger occurs when a company is purchased and absorbed by another business entity or when an existing company merges with another to form a new corporate entity. Although this is a common strategy utilized by companies in financial hardship, it should be highlighted that M&A deals are frequently the consequence of the potential for business synergies that may be created by integrating the two businesses rather than by financial despair.

Reverse Merger : A reverse merger allows private companies to become publicly traded companies without conducting an initial public offering (IPO). A reverse merger occurs when a private business buys a controlling stake in a public corporation and controls its board of directors.

Divestiture Divestment is  the sale  of  subsidiaries or other assets  such as subsidiaries and intellectual property (IP), which companies can sell. Form a spin-off, which creates a new firm out of an existing component of the company; or issue an IPO, which sells a piece of the company to public shareholders; or leave a business via a trade sale, which is normally handled by auction.

Corporate Restructuring Features 

Here are the most common features of corporate restructuring strategies:

  • Assets that are no longer productive are sold.
  • Some functions are outsourced.
  • Enhances the balance sheet of the corporation.
  • Tax liability is reduced.
  • Operational relocation
  • Marketing, sales, & distribution have all been reorganized.
  • Labour contract renegotiation
  • Repositioning or rebranding in public relations
  • Corporate debt restructuring

Why Leverage Corporate Restructuring Services from TRC Corporate Consulting ? 

If a transaction is part of the corporate restructuring strategies—as in M&A, reverse mergers, & divestitures—valuation for corporate restructuring services will be required to determine the worth of the business or business’s assets affected by the restructuring.

In many circumstances, extensive valuation research is required. Moreover, organizations can benefit from corporate restructuring services because it might get challenging to devise the optimal strategy in any particular situation if the worth of assets is unclear. A detailed analysis of the company and its assets will assist executives in making the best-informed choices possible.

Therefore, it's critical to have a firm grasp on the value of your company's assets before beginning reorganization. Improper value assumptions might cost your company money if they drive to implement a bad restructuring strategy. And, for the effective asset valuation and effective risk management strategies, even the world's most prestigious companies trust our specialists as they provide expert value opinions. And, if you want to leverage our professionals’ service, you can contact TRC Corporate Consulting and discuss with us about your specific circumstances so we can figure out the best restructuring strategy for your business.