What is Corporate Restructuring ?

The terms “corporate restructuring' refers to the complete process in which the company combines its business operations and increase its positions for attaining the predetermined goals, stay in the competition and earn more profits. The basic goal of corporate restructuring is to manage the business operations in an effective, efficient and competitive manner for increasing the market share, brand power and synergies of the organization. It consists of significant re-orientation, reorganization or realignment of assets and liabilities of the organization through conscious management actions with the objective of drastically altering the quality and quantity of the future cash flow streams. In the present situation, the joint ventures, alliances, mergers, amalgamations and takeover is the simple and fast way of increasing ability and obtaining a large number of market share.

Reasons for Corporate Restructuring 

• The companies have to open new export houses in order to survive in the cut-throat competition due to globalisation. As only the producers having a lower cost of production can exist in the market according to the global market concept. Hence, restructuring of the companies becomes compulsory.

• The companies are compelled to approach a new market and new types of customers due to the modification in fiscal and government policies such as deregulation or decontrol.

• In order to enhance the performance of the organisation, it becomes very important for companies to accept the alterations made in the sector of information technology.

• There are numerous companies divided into the smaller business segment The corporate restructuring also arises due to the wrong division of the businesses? The division of product that is not suitable for the company must be disposed of. The companies are forced to re-launch themselves due to cut-throat competition.

• The reduction in the number of personnel becomes important both at work and managerial level to increase the level of productivity and to minimise the cost.  

• The various medium scale companies are influenced to work in the global markets because of the easy convertibility of rupee.

• The companies operating in the competitive market requires to emphasis on the basic activities of the business for earning synergy benefits, lowering the operating costs, to increase the productivity of the operations and to make use of managerial knowledge so that the business can earn a profit.

• The combination of various abilities and development of activities will help to attain the economies of scale.

• The business risk can be reduced by expanding and changing the business activities which will help the firm to attain the minimum target rate of return.

• The unprofitable company by the help of re-structuring can be transformed into a profitable company.