Corporate restructuring refers to the process where a company revamps the structure of company so that company turns profitable if it is a loss making company or become more profitable if it is a profit making company. Given below are some of the reasons due to which companies go for corporate restructuring –
- Apart from increasing the profits other reason behind company going for restructuring is to make company more competitive as compared to other peers in industry.
- If a company is highly leveraged than company go for debt equity restructuring in order to reduce the interest burden for the company.
- Another reason behind restructuring is to reduce the cost of operations for the company so that company profit margin improves.
- If a company is operating at below capacity than in order to utilize the excess capacities companies go for restructuring.
- If a company is listed in stock market it feels that current market price does not justify true value for a company, and then also company will go for corporate restructuring so as to improve shareholders confidence in the company.
- Another reason for corporate restructuring is when company is into too many businesses or over diversified; it may want to concentrate only on one business than corporate restructuring is the best way to solve that problem.
Apart from above reasons there may be many other reasons for corporate restructuring depending on the industry in which company is operating and situations in which individual companies finds themselves.