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Company restructures – Everything you need to know

By Sue Redmond

22 July 2022 : Industry News

Restructuring a business - what you need to know

When you hear the words ‘company restructure’, you might initially think about news reports of businesses in trouble, however, whilst this can be one reason why a restructure is implemented, it’s certainly not the only one. 

In fact, some of the most recognised names in business have gone through restructures for many different reasons. Google announced a restructure in 2015, bringing in a new CEO which freed up its two cofounders to spend time exploring new opportunities. Facebook has been through two restructures, one to accommodate growth at the turn of the last decade and a second which followed the backlash they received on their approach to cyber security. 

But what does a restructure mean? And when should a company think about implementing one? 

What does restructuring mean? 

Put simply, it’s where a business makes a change to its organisational or financial structure. This could be for a variety of reasons, from enabling further growth or freeing up opportunities, to preparing for a buyout/merger or trying to turn it around from a difficult financial position. 

The latter is usually the reason which springs to mind first and is known as ‘cost restructuring’. This usually means reductions to budget or unfortunately redundancies. This is well-known as it’s probably the one you’ve heard about in the news when the term ‘company restructure’ is mentioned. 

There are others though which don’t get mentioned quite as often. These can include things such as mergers and acquisitions, where a business incorporates an existing company, allowing for a quick increase in profitability, capacity and market reach. We’ve been through a number ourselves over the last year or so and you can read our Client Services Director, Tom Bostock’s article discussing the benefit of them here

Other examples can include:

  • Legal restructuring - including a change of ownership or making a company its own separate legal entity.
  • Repositioning - where a business has decided to refocus its attention and convert to a new business model. 
  • Spin-off - where a business unit is made into a company itself but retains ownership.
  • Divestment - where a company sells an underperforming part of the business. 

When should a business consider restructuring?

The only inevitability when it comes to business is that things will change over time. Your ambitions will change, as may your product lines and your competitors. This need to evolve at specific points will create opportunities where a restructure may be of greatest benefit. These can include: 

  • A change in the ownership or management of the business. 
  • A merger or acquisition.  
  • Purchase of property or significant investment in plant and machinery.
  • A move to a new geographical area. 
  • A growth or decline in the size of the business/product lines. 
  • A plan to buy or sell. 
  • Excess cash in the business, or saving towards a large purchase or investment.

What should a business consider to make a restructure successful?

A restructure can be an opportunity for business owners to reset what their company is currently doing and instead focus on what they want to achieve, putting in place a structure that allows this to happen. Any company wishing to go through such a process needs to have a well-thought-out and executed plan, as well as consideration for the industry, customer and their employees. 

Firstly, it’s important, to be honest about where you are right now and where you want to be. What is impacting you from achieving these goals? Is it a financial issue, are you losing customers too easily or is it a wider issue you need to focus attention on?  

Once you have this assessment, you can review your strategy and business model to ensure it gives you the best chance of success. This can mean reducing complexity, determining your core activities, creating an organisational structure which clarifies roles and the management of tasks and finally managing uncertainty and resistance to ensure nothing impacts the roll-out of the new structure. 

As mentioned before, the term ‘restructure’ can have negative connotations, so it’s important that customers and the wider industry understand the need for restructuring, especially if it’s a positive step for the business. Communication is also incredibly important to your team. A restructure can create a sense of fear which may have a negative impact on their day-to-day work. The more you communicate and the more they know at an earlier stage, the easier it is to clear that uncertainty. 

A restructure can take place for much simpler reasons, such as the purchase of new commercial premises or a significant investment in kit for the business. We would look to restructure the business in order to protect these assets and secure the longevity of the business. It may be a good idea to restructure before if there are excess cash reserves in the business and/or you need to save some money to put towards future plans.

Don't go through a restructure alone

Finally, seek expert advice. Get in touch with professionals who can help guide you through the process, help you explore the options and come up with the best way to move forward. A restructure is a big step and it’s important that you have the support of experts around you who can give you the advice to really help your business to grow. 

If you’d like to get some initial advice on reorganising and restructuring your business, please do get in touch. 

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