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Restructuring Strategies Explained

Restructuring refers to making structural, financial, or operational changes to a company in order to optimize profits, improve efficiency, or address financial difficulty. There are various restructuring strategies including mergers and acquisitions, spinoffs, cost restructuring, divestment, repositioning, legal restructuring, joint ventures, strategic alliances, slump sales, and debt restructuring. Debt restructuring involves negotiating with lenders to lower interest rates and extend payment deadlines to increase the likelihood the business can fulfill its debts and continue operating.

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46 views2 pages

Restructuring Strategies Explained

Restructuring refers to making structural, financial, or operational changes to a company in order to optimize profits, improve efficiency, or address financial difficulty. There are various restructuring strategies including mergers and acquisitions, spinoffs, cost restructuring, divestment, repositioning, legal restructuring, joint ventures, strategic alliances, slump sales, and debt restructuring. Debt restructuring involves negotiating with lenders to lower interest rates and extend payment deadlines to increase the likelihood the business can fulfill its debts and continue operating.

Uploaded by

palakshk888
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Restructuring in simple language means, making structural, financial, or operational changes

in the company in times of change in the ownership, to optimize profits, to improve


efficiency, and in times of financial difficulty. Restructuring helps to improve overall
productivity. There are various restructuring strategies, some of which are listed below:
Restructuring strategies
Merger and acquisitions
A merger is the coming together of two or more businesses, and it can happen through
amalgamation, absorption, or the creation of a new business, whereas an acquisition is the
taking over of one corporation by another. In simple terms, ownership is transferred when one
company buys another.

2. Spinoff restructuring
A spinoff is when a company sells new shares of its existing business to create a new publicly
traded independent entity, It is called a spin-off. In simple terms, a spinoff is when a parent
company is divesting from one of its business units with the expectation that the business will
be worth much more after separation and becoming a new company.
3. Cost restructuring
Cost restructuring is mostly preferred to improve the overall profitability of the business. This
strategy is mostly used in times of economic crisis.

4. Divestment
Divestment is primarily preferred by companies when their business is no longer profitable or
fulfilling a strategic purpose. It primarily focuses on selling subsidiary assets, investments, or
divisions of the company to maximize the value of the company. Divestment can be a
deliberate decision, sometimes it can also be forced due to regulatory or legal actions.

5. Repositioning restructuring
Repositioning is used when companies want to change their previous or old business model
and establish a new model or redirect the focus of their business.

6. Legal restructuring
Legal restructuring refers to any restructuring activity that a company uses when they want to
evaluate the ethical practices and procedures within the company and create legal guidelines
to ensure all the departments follow the provided legal guidelines.
7. Joint venture
A joint venture is created when two or more businesses collaborate and pool their resources
and knowledge in order to improve overall performance and assist one another's business
operations. Joint ventures can be permanent or transitory.
8. Strategic alliance
The strategic alliance involves forming a partnership or alliance with other
organizations/businesses/companies to share resources, knowledge, technology, etc. Such an
alliance can help the companies to enter into new markets.

9. Slump sale
A slump sale is when a company sells part or the whole of its business for a lumpsum
amount. The buyer is also entitled to assets, liabilities, Intellectual property, staff, etc.

10. Debt restructuring


While contemplating bankruptcy, several businesses try to restructure their debt. Getting
lenders to agree to lower loan interest rates, longer payment due dates for the company's
commitments, or both is a common step in the debt restructuring process. These actions
increase the likelihood that the business will fulfill its debts and continue operating. Creditors
are aware that should the business be driven into bankruptcy or liquidation, they would
receive considerably less money.

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