About Corporate Restructuring & Why You Need To Do This
Company restructuring is an effort made to improve and maximize the performance of a company so that the company can continue to grow, or at least be able to adapt to the situation and conditions at hand. In short, restructuring is carried out so that the company’s performance becomes healthier.
Generally, the term restructuring is used when a company will make a comprehensive improvement. This is usually done to improve three aspects of the company, namely assets/portfolios, capital/finance, and management/organization.
When carrying out a company restructuring, it is mandatory to pay attention to the interests of many parties, starting from the company, shareholders, employees, creditors, business partners, and the public.
The following are 2 types of restructuring that are commonly implemented by many companies.
1. Asset or Portfolio Restructuring
Asset restructuring is the activity of arranging company assets so that the company’s performance is getting better. Matters that are included in company assets include every business asset, business line, division, business unit, and subsidiary.
Asset restructuring can be done in many ways, such as rescheduling, grace period, reconditioning, haircuts, lowering interest rates, granting new debt, debt to asset swaps, debt to equity swaps, selling unproductive or indirect assets, converting debt into bonds, changes in debt to convertible bonds, takeover of debt by other parties, replacement or change of Guarantor, additional capital by old shareholders, additional capital by new shareholders through an IPO scheme, capital recapitulation, or other forms that are not against the law.
2. Company restructuring
Company restructuring is a restructuring of the company’s management system, which includes capital management and management. The goal is to make the company’s performance healthier.
The health level of a company can be measured by using several ratios, such as the level of efficiency (efficiency ratio), level of liquidity (liquidity ratio), level of asset turnover (asset turnover), leverage ratio, and market ratio.
Besides, company restructuring can also be a process that significantly changes the company’s business model, management, or financial structure to overcome certain challenges or problems.
Restructuring can be done in various ways, such as changes in corporate strategy, changes in vision, reorganization, changes in corporate culture, installation or changes in technology, replacement of members of the board of directors or commissioners, mergers, consolidations, acquisitions, leveraged buyouts, spin-offs, and other actions that does not conflict with statutory provisions.
Each company can undertake one of the above types of corporate restructuring. However, restructuring is often carried out simultaneously, whether it is an asset or a company, because both are closely related.
Before restructuring, company management must carry out a comprehensive assessment, also known as due diligence. The results of this assessment will be used as a basis in determining the priority scale when company restructuring will be carried out.
Why do companies need to restructure?
Whether there is a problem or not, you must continue to restructure the company regularly, for example, every five years. Don’t wait until you feel stuck, as this will only make the restructuring process more complex.
Some of the reasons that generally cause a company to restructure include legal problems, market demands and geographic problems, changes in company conditions, problems related to labor unions, relations between holding and subsidiaries, shift in ownership, and so on.
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