What are corporate restructuring services? - Overview, Reasons, Types
August 05, 2021
Corporate restructuring services include the process of reorganizing a company's legal ownership, operational, or other structures to better serve its stakeholders. Debt forgiveness, the sale and acquisition of debt portfolios, company disposals, and reorganizations are among the most common. In this article, we will be discussing why corporate restructuring may be required, its types, and where you can avail best corporate restructuring services in Gurgaon.
When is Corporate Restructuring Required?
Corporate restructuring services are required in the following cases:
- Change in strategy: A faltering business's management seeks to improve the organization's efficiency by eliminating branches or divisions that aren't aligned with the company's main goal. The segment does not appear to be a strategic fit for the company's long-term goals. As a result, the company intends to focus on its core strategy and promote these assets to clients more effectively.
- Lack of Profits: It can't be profitable enough to cover the company's capital expenditures without causing a financial loss. The division's poor performance could be attributed to management's poor decision to start it, or to a reduction in profitability as a result of greater service costs and increased client demands.
- Requirement of Cash Flows: A division sale will help the company generate a large amount of cash. If your company is having financial difficulties, selling an asset is a quick way to raise funds and pay off debt.
Types of Corporate Restructuring Services
Following are the various types of corporate restructuring:
- Restructuring involving money - This type of reconstruction may occur as a result of a significant drop in overall transactions due to bad financial conditions. The corporate substance can alter its value concept, obligation adjustment plan, value property, and cross-holding structure. This is for the benefit of the company and the organization.
- Restructuring in a Hierarchical Structure - The term ‘ organizational reform’ refers to a change in an organization's authoritative structure.
- Asset diversification - A firm can minimize its size in a variety of ways. The following are the methods for isolating a division from its operations:
- Divestitures - Under divestitures, a company sells, liquidates, or spins off a subsidiary or division. The criterion for divestiture is to sell the divisions directly to an outside buyer. The selling corporation receives a monetary payment, and ownership of the division is transferred to the new buyer.
- Carve-outs of equity - By diluting the equity participation in the division and selling to external shareholders, equity carvings create a new and independent firm. The new subsidiary's shares are offered in a general public offering, and the new subsidiary becomes a separate legal entity, with operations and management detached from the corporation.
- Spin-offs - The corporation forms a new entity under the heading of by-products, which is distinct from the company's original business of equity carve-outs. The key distinction is that the shares are not offered for sale to the general public. Instead, existing shareholders receive a proportionate share of the stakes. This ensures that the original company's funding base is kept distinct from operations and management.
- Split-offs - Split-offs provide shareholders with new trading stocks in exchange for their existing shares in the company. The rationale is that stockholders will abandon the company if the new subsidiary stocks are accepted.
- Liquidation - Liquidation involves the dismantling of a firm and the sale of individual properties or units. These are frequently confused with bankruptcies.
Benefits of Corporate Restructuring Services
There are numerous benefits to restructuring a firm, just as there are numerous reasons for a corporation to reorganize. Some of the advantages are monetary, such as reviving a failing firm, raising the value of a company, and preparing it for sale or transfer to the next generation.
Other advantages include acquiring a competitive edge, such as assisting a company is positioning itself for growth, allowing for the acquisition of new accounts, or allowing for geographic development. The overall benefits of business restructuring, on the other hand, can be summed up in two words: survival and success.
Corporate Restructuring Services in Gurgaon
Resurgent India is a leading financial advisory that helps its clients in various corporate restructuring services in Gurgaon. We assist in services like adherence to reorganization legislation, the procedure for corporate restructuring, debt restructuring, restructuring of the financial system, and insolvency and restructuring services. Our team of experts will provide custom-made solutions that will be best suitable to your business needs.