All you need to know about restructuring By Suzzanne Uhland

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In our dynamic world, companies must think in many aspects to be successful, due to the constant challenges and changes existing today. Currently, organizations have to consider not only what they do and their core business but also the implications of their failures. This situation could be very critical and all the organizations what are passing through it must be careful with that it involves: a possible restructuration.

Before we going deeper with the concept of restructuring, we should define it and understand what it is.

Restructuring definitionBasically, the concept of restructuration in the business environment is to reorganize all its elements with the main purpose of being more profitable and better structured. In other words, it is the reorganization of its operations, human activities, legal structure, among other areas, to be more effective and financially healthy.

It is important to say that the restructuration process is for those companies that are having multiple problems with their operations and procedures, mainly the financial ones.

The restructuring considerationsIf a company must pass through a restructuration, it must ensure enough funds for its implementation, due to all the events and working tasks it implicates. Put differently, if a business must pass through a reformation process, it has to guarantee the sufficient and adequate resources to front facing this situation. In addition, they have to consider both internal and external factors, like their assets, market share, employees, debts, among other elements, to see the viability for a reorganization.

Another important consideration for a restructuration is to establish better conditions for company’s debts, that is to say, that organization must design and create an acceptable payment plan to cover their financial problems. This lets companies manage more responsibly their resources, giving to creditors the reliability they need to support and trust in a specific organization in its restructuration process.

For a better relation with creditors, companies must improve their communication with them. This gives to the financial firms the needed confidence to backing economically those organizations, which are in a restructuration process.

Besides the relation with creditors and the financial aspects, it is vital for companies to redesign their strategies and business plans, for avoiding the same mistakes of the failures which take them to a reorganization process. Additionally, organizations must update constantly their tactics, tracking them to see if they are working or not.

There are other considerations involving restructuration, like assets and debt valuations, negotiations, cash flows, legal advice, taxes, and many other concepts which are part of a business reform. In this post, we are just talking about the more known elements in this situation, but there are other very significant concepts to be contemplated.

In conclusion, a company reorganization is a very complex concept, involving a lot of elements, but the most important consideration is to know how the financial problems will be solved with creditors and which strategies the organization will develop for a successful reform.

Restructuring reasonsAs we have mentioned before, a business restructuration could help a particular company to be financially healthier, solving their economic problems and being more profitable, but it is important to mention other existing situations where organizations must be in a reforming process.

One of the main motivations for a restructuration is bankruptcy. When a particular organization has insolvency, its leaders must think in a reformation, both in the financial and resources aspect. In other words, if some business is declared in bankruptcy, it has two alternatives; reorganization or liquidation. In the reorganization situation, the company must consider what we mentioned above and work hard to overcome the crisis, but it must liquidate its operations and activities.

Another cause for a restructuration could be a change of ownership. This situation makes that company think what will be the new business strategy, the working way, the new leader performance, among other things that a new possessor can bring, changing and reforming the company. Put differently, a new proprietor could bring new ideas and working manners, so the establishment must pass through a reorganization for developing new procedures and methodologies.

A demerger is another factor for a company reorganization. This is the opposite of mergers and acquisitions, which is the unification or combination of the working units in different organizations. A demerger implicates that a particular business separates into multiple components, giving to each of them new elements, resources, and structures.

There are other substantial reasons for a possibly restructuration, like a company repositioning, a buyout or a new acquisition, but what we mentioned above are the main motives for a reorganization.

We can conclude that a restructuration is a very critical process because from it depends on keeping alive a specific business. If a particular company does not understand what it implicates and does not develop an adequate reforming plan, the only alternative left is the liquidation of its activities and operations.

Related: The Real Reasons Why Most Companies Fail by Suzzanne Uhland