Can Restructuring Save Your Business?

Restructuring a company may become desirable or essential for a number of reasons, but how the process is planned and executed can make the difference between success and failure. It is therefore essential to fully understand why restructuring has become necessary, and then devise a detailed plan of precisely how to go about achieving the desired result and what the timescale will be.

Whatever the reason for instigating a restructuring program, it is essential to seek the advice of experts in the field. As with many aspects of human activity, the devil is in the details; get one or two apparently insignificant aspects of the process wrong, and the result could be catastrophic. DLA Piper is a good example of a highly reputable global law firm that specializes in advising and managing company restructuring. Its CEO, Robert Bratt, has over 30 years’ experience in the business, handling client accounts worth many millions of dollars. Consulting a firm such as DLA Piper is a surefire way of ensuring that your restructuring process is as smooth as possible.

Mergers and Acquisitions

It could be that a recent merger or acquisition has resulted in the duplication of various departments. In order to improve efficiency and profitability, reducing the labor force and possibly selling off redundant premises and equipment is essential if economies of scale are to be maximized.

Corporate Spin-offs

Over time, the company may have grown and diversified to the point where certain sectors are so disparate that internal conflicts of interest begin to appear. As soon as such a situation is recognized, it is in the interest of all concerned that action be taken to rectify the matter. In many cases, restructuring may be the most suitable solution, whether the end result is the company entirely divesting itself of the extraneous sectors and only retaining the core business, or reorganizing its structure into a different format, perhaps a holding company with a number of subsidiaries in a loose group.

Downsizing

Downsizing may become necessary because the company is making losses, its order book is shrinking or the introduction of new technology means the labor force has to be reduced in order to remain competitive.

Timing

The question of how long the restructuring process should take has no clear answer. It is largely down to the individual company and the reason restructuring is being contemplated.

If the company is trading profitably and there is no immediate threat to its continuing success, it may be sensible to take months or even years to complete the process. It is important not to spook customers or staff by acting in what may be perceived as a state of panic. Instead, it would be wiser to publicize the plan and, where layoffs are involved, offer employees incentives to leave or if appropriate, take early retirement.

There are situations in which the opposite is deemed to be more appropriate or even essential. For example, if the business is making unsustainable losses, no time should be wasted before acting. That is not to say management should wield the axe indiscriminately; if restructuring is necessary to save the business, careful behind the scenes planning is required. No one outside of a small circle of senior managers should be given any inkling of what is happening, and a list of employees who are to be let go should be drawn up, along with details of equipment and premises that may need to be disposed of. It might also be necessary to consider moving to smaller premises. The cost of the entire exercise should be accurately assessed and then the plan should be actioned without delay.

Restructuring carries many risks, and though costs should always be kept under strict control, cutting corners by choosing not to employ the services of an expert may ultimately lead to the failure of the project.