California Corporate Restructuring Lawyer
Corporate restructuring is a complex process with many moving parts. Generally, corporate restructuring occurs when a corporation is struggling financially and needs to change the way it operates to save money. Our experience California corporate restructuring lawyer can help your company minimize restructuring costs.
A company will restructure its debts, cut unprofitable business practices, and optimize their procedures and practices to make their company viable. When done right, corporate restructuring can save a company; when done badly, they can put a company out of business permanently. Hiring a corporate restructuring lawyer will ensure the process goes smoothly.
What Is Corporate Restructuring
Corporate restructuring is used to turn around a company facing significant financial difficulties. The financial, operational, legal, and even ownership of the company are changed or adapted to give the company a second chance. Through this process, you will need the assistance of financial and legal experts to advise and negotiate deals on behalf of your company.
Corporate restructuring also occurs if there is a change of ownership in a company. This may occur as part of a merger, takeover, bankruptcy, buyouts, etc.
Types of Corporate Restructuring
- Financial Restructuring – This will happen due to economic conditions. The company will look at its finances and debt and change the management of its funds to buy time to turn the company around. They may change the equity holdings, equity pattern, debt-servicing schedule, or cross-holding patterns.
- Organizational Restructuring – This will look at the personnel in a company. The company’s hierarchy might change or reporting relationships. Job descriptions might be changed, and downsizing may occur too. This type of restructuring is made to reduce costs and pay off outstanding debt to allow the business to continue trading in some form.
Reasons for Corporate Restructuring
- Change in strategy – certain divisions and subsidiaries not part of the core strategy of the company may be removed. They may not fit in the company’s long term vision, and the new direction they have taken. Assets are sold to buyers, and employees may be downsized.
- Lack of profits – Certain parts or functions of the business may not be making enough profit to cover their running costs or capital. The decline in profits may be due to a change in customer needs, increasing costs, or poor decisions by management.
- Reverse synergy – In opposition to the concept of synergy, reverse synergy is where an individual part of the company may be more than the merged parts. Management might decide that separating and selling that one asset or part of the business will create more value than owning it.
- Need for cash flow – Selling or getting rid of an unproductive and unprofitable part of the business can bring cashflow into the business. This is a great way to raise money if a business is struggling with traditional fundraising methods.
Characteristics of Corporate Restructuring
- Changing corporate management
- Conducting a PR campaign to gain a better market foothold
- Improving the company’s balance sheet by disposing or selling unprofitable divisions
- Outsourcing operations to a more efficient third party
- Reducing staff
- Refinancing or rescheduling debt to minimize interest payments
- Renegotiating labor contracts
- Reorganizing sales, distribution, marketing and other such functions
- Selling underutilized assets
- Shifting operations to lower-cost locations
Important Aspects to Consider in Corporate Restructuring Strategies
- Human and cultural synergy
- Legal and procedural issues
- Taxation and stamp duty aspects
- Valuation and funding
Types of Corporate Restructuring Strategies
- Merger –two or more businesses are merged together. This can be done through forming a new company, an amalgamation, or absorption.
- Demerger – two or more companies are combined into a single company, both benefiting from the merger.
- Reverse Merger – Unlisted public companies can convert into a listed public company. The private company has a majority shareholding in the public company.
- Disinvestment – When a company liquidates or sells a subsidiary or asset.
- Takeover or Acquisition – A company buys and takes complete control of another company.
- Joint Venture – Two or more companies create an entity together. Expenses, revenues and control of the company are agreed upon in advance through legal contracts.
- Strategic Alliance – two or more companies collaborate together while still acting as independent businesses.
- Slump Sale – A business sells one or multiple assets for a lump sum. The individual values of the liabilities or assets are not considered in the sale.