BusinesNews Wire Press Release company Logo
Home BNN How Financial Restructuring Services Can Increase Profitability?

How Financial Restructuring Services Can Increase Profitability?

by Busines Newswire
0 comment

Financial restructuring can be described as a strategic process that companies undertake to regain profitability and ensure financial stability in the long run. The process makes important changes to an organization’s financial structure, comprising cost reduction, debt restructuring, and strategies for revenue enhancement.

When your company is not in a risk zone, it is necessary to opt for financial restructuring. In a critical situation, the organization should renegotiate all its debts. To get this done, they must convince their partners of their ability to take on the required turnaround. It is here that companies should opt for financial restructuring services.

In this article, we will discuss more about financial restructuring and how service providers in this field help companies regain profitability.

The Process of Debt, Equity, and Asset Restructuring

Financial restructuring helps a company to move beyond its financial complications, attain strategic goals, and promote innovation. However, not all restructuring procedures are the same. Based on the extent and nature of the financial stress that your company is facing, the preferences and objectives of stakeholders, and the feasibility of options, the restructuring processes can be applied.

Here are three processes that professional financial restructuring services use to add more profits to your business:

Debt Restructuring

It includes making slight changes to the terms and conditions of a company’s current business obligations to minimize the financial burden and enhance the cash flow. This process can be in multiple forms, for instance, reducing the interest rate, extending the maturity, changing debts for assets, and transforming debt into equity. It can help a business to avert bankruptcy, default, and liquidation and also preserve reputation and relationship with customers and creditors.

One example of this process can be traced to the predicament faced by General Motors (GM). The brand experienced a huge debt restructuring more than a decade back, because of its bankruptcy reorganization. GM decided to minimize the debt to $40 billion by exchanging debt for canceling a few debts and equity, as well as receiving equity injections and government loans.

SierraConstellation Partners states that leading players in this niche offer a company solution for balance sheet restructuring both in and out of court. Execute and structure refinancing transactions, that include equipment loans, unsecured vendor liabilities, and ABL term debt. It also helps companies lead the negotiations with potential and current lenders throughout the capital stack.

Equity Restructuring

This process includes altering the business ownership and capital structure to add new funds, bring down capital costs, or improve corporate governance. Equity restructuring includes multiple actions, for instance, implementing new shares, buying current shares, paying dividends, combining and splitting shares, and altering the privileges and rights of shareholders.

This process helps in enhancing a company’s financial performance. It also helps to draw in new investors, facilitates mergers and acquisitions, and maximizes the market value. One of the best examples of this process is Netflix, which carried out a 7-for-1 stock split so that its shares are accessible and affordable for individual investors. It also wanted to boost its liquidity and market capitalization.

Asset Restructuring

This process comprises buying, selling, and interchanging business assets to enhance operational effectiveness, competitive edge, and profitability. Asset restructuring can comprise multiple strategies, for instance, getting new and complementary assets, and divesting underperforming and non-core assets. It also comprises leasing or outsourcing assets and merging and consolidation assets as well.

A financial restructuring service provider with this process can enable a business to concentrate on its core competencies, minimize expenses, generate more cash, maximize synergies, and diversify its portfolio.

One example of asset restructuring can be seen with IBM, which sold the entire personal computer segment to Lenovo to move out of the low-margin and extremely competitive market. Instead, the brand wanted to concentrate on its high-end and high-growth businesses in services, cloud computing, and software.

How Does Financial Restructuring Enhance Profitability?

The financial restructuring process can improve the profitability of any company by improving its revenue, enhancing its margins, and bringing down its expenses. For instance, it is very much possible for a company to venture into new markets, diversify its product portfolio, or get hold of brand-new customers to maximize all sales.

Additionally, a business can reduce its operating costs, implement operational efficiencies, and optimize the tax structure to bring down expenses. An increased profitability can enable a company to come up with scopes for more income, retain the correct earnings, and maximize return on equity and assets.

In conclusion, every business needs a way to plan their expenses so that it can help them to maximize profit and reduce the levels of faux pas in business. If you also want to add profit to your start-up venture, you can opt for financial restructuring services to let them understand your unique want and cater to it in the best possible way.