Corporate
Reorganization/Res
tructuring
Esther Kihara
B211-01-0048/2024
Introduction to restructuring
• Corporate restructuring refers to the reorganization of a
company’s structure, operations or finances to improve
efficiency, profitability and competitiveness.
• It aims to address challenges such as market changes,
inefficiencies or financial crises.
• The corporate restructuring includes use of mergers,
acquisitions, financial restructuring and operational
restructuring.
Types of corporate restructuring
• Corporate restructuring is divided into many categories some of
which are discussed below:
1. Financial Restructuring –involves changes to the company’s
capital structure such as debt refinancing and liquidity
planning.
2. Operational Restructuring –focuses on improving the business
model such as mergers, acquisitions or changes to business
units.
3. Mergers and Acquisitions –merging or acquiring companies for
synergies, market extension or product extension.
Symptoms of the need for
restructuring
• There are three major symptom:
1. Operational Symptoms – issues like outdated technology,
high staff turnover and supply chain delays.
2. Strategic Symptoms –lack of clear mission, growth
mismatch and declining market leadership.
3. Financial Symptoms –failure to meet short –term
liabilities, increasing operational costs and falling share
prices.
Corporate Restructuring Tools
The corporate restructuring tools are:
• Mergers- horizontal, vertical, market –extension and
product extension mergers.
• Acquisition and Takeover- this can be friendly or they can
be hostile takeovers.
• Divestments –sell-offs ,spin-offs, equity and carve outs .
• Leveraged Buyouts (LBO) and Management Buy-
Outs(MBO).
Key objectives and benefits of
corporate restructuring
• Improve Financial Security –restructuring aims to stabilize the company’s
financial position making it more resilient to market fluctuations and crises.
• Enhance capital attraction –by reorganizing companies become more attractive
to investors and lenders improving their ability to raise capital at favorable
terms.
• Reduces taxes and borrowing cost –by optimizing financial structures and taking
advantage of tax breaks or lower interest rates, companies can cut operational
costs significantly.
• Increasing efficiency and profitability –streamlining operations, reducing waste
and reallocating resources can lead to better performance and higher profit
margins.
