The past two years haven’t been without their pitfalls. In the wake of the COVID-19 pandemic everybody has been affected in one way or another.
One of the areas most affected by the pandemic was in business. The pandemic caused chaos for companies around the world; from offices being forced to close, firms not being able to open their doors, to shifting public interest due to the new realities of life. These things and more all hit the pockets of UK businesses hard.
According to independent research from Simply Business, COVID-19 cost the UK’s small and medium sized enterprises hard, costing them upwards of £100 billion. This accounts for over 99% of all business in the UK, 33% of all employment, and around 21% of all turnover — a blow to these firms is a blow to the nation.
Understanding what protection is out there in order to safeguard the future of your business is vital should it ever be hit by a financial iceberg.
In this article we will discuss four business restructuring strategies that can make sure that you don’t go down with the ship should a financial crisis ever hit. Sail into calmer waters with Inquesta.
How to Define Corporate Restructuring
Corporate restructuring is a vital process, one a business needs to do in the event of a financial crisis. A move to clear money issues and reposition the company in a new, more efficient manner can enhance the future operation of the business.
In corporate restructuring, a management team of an affected business will seek to hire a financial/legal expert to act in an advisory role. The expert will assist and support the company, and help to oversee a total shift in the business; from the management to the day to day operations, and more.
The assigned expert will also take the lead in any negotiations should the corporate restructuring be started to help facilitate a merger/buyout of the business.
If you would like to understand more about corporate restructuring and what it entails, please check out our blog on the subject.
Reasons for Corporate Restructuring
In most cases, corporate restructuring takes place due to a business needing to change as a result of financial issues. A company will be struggling to maintain a consistent monthly profit and begin to slide into debt, and before the arrears become too large they will opt to look inwards and restructure in order to reduce the debt.
However, this is not the only reason for corporate restructuring. Other common causes of corporate restructuring are:
- To prepare for a potential takeover
- Preparing for a potential merge with another business
- Change in ownership
- To reduce company costs
- Help make company roles more efficient
Types of Corporate Restructuring
There are commonly two different types of corporate restructuring:
Financial restructuring will take place as a result of a business experiencing financial difficulty. It is often the process of reorganising the finances of a business, its equity, debt, etc.
While it can operate under a variety of guises and methods, the overarching aim remains the same — to restructure the operation of a business to create an environment to support long-term success and sustainable practices.
As the name suggests, organisational restructuring is a change in the management and organisational structure of a business.
The purpose of organisational restructuring can be two-fold, both to streamline the operation, or in some circumstances to cut costs and pay off debts, or set a business up for a possible sale or merger.
Aspects of a business that can be restructured can stem down to altering the hierarchy at the top of a company (usually limiting the amount of people with a position of control), cutting down a bloated work-force, changing roles within a team to better suit the needs of the firm etc.
4 Forms of Corporate Restructuring
A corporate restructure can take place under a variety of guises depending on what in particular a business needs to change, and for what purpose:
- Mergers and Acquisitions: Mergers are the process where one company is purchased and absorbed into another. In some cases a business that is merged will in effect, cease to exist. Mergers and acquisitions are common strategies used by companies struggling financially to find a viable way to keep the business going. It is also common for mergers and acquisitions to be used as a way for two companies to mutually grow and benefit from each other’s industry position, to form one larger synergised operation.
- Demerger: A demerger is an occasionally complicated process whereby a business merger is deemed to not be working out as planned. This could be because of an unforeseen clash of company culture, management egos, or differing strategies. A demerger can also be a way to streamline a company in preparation for a takeover. Both companies will agree to go their separate ways.
- Joint Venture: In a joint venture, two or more parties will come together to form a totally new, unique business venture. Both businesses will share their resources and experience, and in turn split the responsibility, expenses, and profits. A key aspect of a joint venture is that control is shared between both parties and no one side controls more than their share of the business dictates.
- Strategic Business Alliance: A strategic alliance allows two or more businesses to come together, pool their knowledge and resources together to a shared goal, while remaining totally independent organisations in their own right.
There are alternative business restructuring strategies that are designed to suit the individual needs of a company. For additional information on what options are available to you, it is a good idea to seek specialist assistance.
How Inquesta’s Corporate Restructuring Services can Help
Restructuring a business can be the most effective tool to ensure that a company is running in the most efficient manner for promoting future success.
Inquesta’s expert team boast the expertise to help guide you and your business into a post-pandemic world and guarantee that you are set up for prolonged, sustainable success.
We know what it takes to restructure a company, and we know how to help you. Years of experience with business restructuring strategies mean we are perfect to help any restructuring go smoothly, with as minimal complications as possible.
We have a free dedicated guide available on our website, providing you with all of the tips and information you could possibly need when it comes to restructuring and recovering from financial adversity, particularly in the wake of the pandemic.
For more information about how Inquesta can help you, book a free consultation or contact our team today.