What is corporate restructuring?
In the current economic climate, many companies are facing a difficult operating environment. In some cases, this means that corporate restructuring may have to be undertaken for the business to remain viable.
What is corporate restructuring? Corporate restructuring can cover a whole range of activities, from cost-cutting and streamlining, re-branding, financial restructuring to the worst case scenario of winding down a business. Businesses can go through many forms of corporate restructuring to remain competitive and stay in business. Restructuring does not have to be something drastic, but can be a series of measures undertaken on a regular basis by the company’s management.
Debt restructuring
In the current economic climate, many businesses are having to go through corporate debt restructuring. Most businesses carry some form of debt, whether it is a simple business loan or corporate bonds. In certain situations, it makes sense for businesses to restructure their debt. For example, when interest rates are high, swapping high interest rate bank loans for other forms of debt can save money. In another scenario, if a business has made a big profit or has increased cash flow, it might make sense to pay down some of the debt, perhaps earlier than planned. In any scenario, debt restructuring, if done properly, can save businesses a lot of money in interest payments and fees.
The most extreme case of debt restructuring comes into play, when businesses cannot pay back creditors. In such cases, it is important to act earlier than later. Banks can help with consolidating your debt, if you have several loans, to help reduce interest payments or obtain a temporary freeze on interest payments, to help you cope until business rebounds. If you are unable to re-pay suppliers, speak directly to the suppliers and see if they can arrange a rolling credit or reduce prices. Sometimes suppliers will agree to some kind of re-payment arrangement, if, for example, you agree to exclusively use them.
Streamlining your business
Another form of corporate restructuring is cost-cutting or streamlining a business. As businesses grow, it is easy for overheads to increase, employees numbers to swell or businesses to lose focus. It makes sense on an annual basis to review operations and figure out where the most costs are stemming from and try to streamline these areas of the business. Many businesses, as they grow, end up adding more and more functions and in some cases, may end up moving away from their core business.
For example, it may make sense to try to outsource certain aspects of the business, to cut costs. For example, for small businesses, it does not make financial sense to have their own payroll department or shipping department – these tasks can be outsourced, probably for much less than it would cost to hire people to undertake these tasks internally.
Getting professional help
Depending on the size of the business, it may make commercial sense to hire professional accountants or consultants to analyse your business and suggest corporate restructuring steps to be undertaken. The UK government offers free advice to business owners via www.businesslink.gov.uk.
At Wilkins Kennedy we have a dedicated WK Restructuring and Recovery team who have helped revive many businesses in financial distress. Not only do we understand what you are going through but we also have a track record for providing realistic solutions. Contact our team today to see how we can best help your business.
