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Business restructuring is a fundamental change of business, its structure. This can modify business processes, the abandonment of some activities, changes in business strategy. Restructuring of the business may be conducted in parallel with the restructuring of the bank loan (sometimes – on request) or debt restructuring of the company as a whole. Restructuring means also the changing the structure of assets and companies’ costs, bankrupt or performing a legal procedure out of this state, or companies trying to raise the price of its shares.
Restructuring of capital means to change the company capital structure (ratio of debt and equity). As a result, the growth of debt relative to their own there is an effect of the tax shields. On the other hand, the growth of debt capital leads to higher financial risks. Accordingly, there is a dilemma between risk and return. Restructuring liabilities or debt restructuring means any change in terms of repayment obligations. There are differences between the restructuring of the loan portfolio as a whole and the restructuring of individual loans. Restructuring the loan, which involves a change in the timing and order of repayment, security, commissions and interest on bank loans, is one kind of debt restructuring. Debt restructuring is carried out using various instruments: Refinancing – The process at which the replacement of the old loans for new, often using other funding sources. Consolidation – the process by which multiple loans are replaced by one. Debt restructuring is often, but consolidation always follows the path of refinancing.
Restructuring of the company – is changing the structure of the company (in other words, order, arrangement of its elements), as well as elements that shape its business, under the influence of factors or external or internal environment. The restructuring includes: improving governance, financial and economic policies of the company, its operations, sales and marketing system, personnel management. The main reason why companies try to restructure is usually a low efficiency of their operations, which is reflected in poor financial performance, the lack of working capital, the high level of receivables and payables. However, even successful companies often conduct structural transformation. Indeed, any modification of the scope of business or market conditions requires an adequate change management and implementation of restructuring programs. For what purposes does restructuring exist? Traditionally, owners and management companies serve two purposes: it is improving the competitiveness of the company with a subsequent increase in its value. Depending on the targets and strategy is determined by one form of restructuring: the operational or strategic.
Operational restructuring involves restructuring the company to its financial recovery (if the company is in crisis), or to improve solvency. It is held by domestic sources of the company with tools to reduce and “straightening”; (the transition from indirect to direct costs), costs, allocation and sale of non-core and subsidiary businesses. As a result of operational restructuring is to obtain a transparent and better managed company, in which the owners and managers can already see what businesses should be promoted and which get rid of. Operational restructuring improves the performance of enterprises in the short run and creates prerequisites for further, strategic restructuring. As indicated in Annual Review of Sociology, strategic restructuring is a process of structural changes aimed at increasing investment attractiveness of the company to expand its capacity to attract external financing and value growth. Implementing this type of restructuring is aimed at achieving long-term goals. The result of its success is the increased flow of net present value of future earnings, growth of the company’s competitiveness and market value of its equity. Holding both operational and strategic restructuring may include either all elements of business systems, or its individual components. There is therefore a classification of the forms of restructuring on the scale of coverage of structural changes. Comprehensive restructuring – a long-term and expensive process, resorted to by only a few companies. It takes place in stages; the transformation affects all elements of the company. In this case, depending on the influence of point transformations on the individual activities of the company corrects the overall restructuring program and continues further work. In contrast to the complex, partial restructuring, it affects one or more elements of business systems. In the course of its implementation changes in the functional areas separately engaged consultants, and often changes are chaotic, and their impact on other business activities are not analyzed. As described in ColinaImperial, it is not surprising that partial restructuring leads only to local results, and may not be effective throughout the business system.
Nowadays, international practice and experience of restructuring shows that it is one of the most difficult management problems. It is not a one-time change in capital structure or in production. This process, which should take into account the many constraints and specifics of the company, where it is held. Consequently, it is necessary to carry out, having a clear purpose, the concept of restructuring, an understanding of each of its stages and the methods with the help of which to act.

References

Annual Review of Sociology (2006). Organizational Restructuring and its Consequences: Rhetorical and Structural. Vol. 32: 171-189.