# Company Restructuring: Processes, Examples, and Key Concepts

![Restructuring](https://www.investopedia.com/thmb/n2IDQhsDi3OzcEh4enZ4GlP2RMU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/restructuring.asp-final-f8769b6a589a4bccaf5bc601c07b4917.png)

*— Investopedia / Paige McLaughlin*

## What Is Restructuring?

Restructuring involves significant changes to a company's debt, operations, or structure to mitigate financial distress. Businesses may [consolidate](https://www.investopedia.com/terms/c/consolidate.asp) debt, adjust operations, or sell assets to improve financial standing. The process can prepare companies for sales, mergers, or ownership changes, ultimately aiming for smoother, more efficient operations.

### Key Takeaways

*   Restructuring involves significant changes to a company's financial or operational structure to address financial difficulties.
*   Companies often restructure to prepare for sales, mergers, or changes in business goals, aiming for more efficient operations.
*   The restructuring process can lead to layoffs, asset sales, and debt refinancing as companies aim to improve financial health.
*   Restructuring costs can include canceling contracts, closing facilities, and repositioning the business for future success.
*   Savers Inc.'s 2019 restructuring is an example where debt was reduced, and ownership was transferred, improving its financial position.

## Reasons and Conditions for Corporate Restructuring

Companies restructure for many reasons, such as weak financial health, poor earnings, low sales revenue, high debt, or increased competition.

A company may restructure to prepare for a sale, [buyout](https://www.investopedia.com/terms/b/buyout.asp), merger, goal change, or transfer to family. For example, a company might choose to restructure after it fails to successfully launch a new product or service, which then leaves it in a position where it cannot generate enough revenue to cover payroll and its debt payments.

With shareholder and creditor agreement, a company might sell assets, restructure debts, issue [equity](https://www.investopedia.com/terms/e/equity.asp), or file for [bankruptcy](https://www.investopedia.com/terms/b/bankruptcy.asp) while continuing operations.

## How Companies Restructure: A Detailed Process

1\. Internal Changes: Modify operations, processes, departments, or ownership for integration and profitability.  
2\. Negotiate Plans: Hire financial and legal advisors for restructuring plans.  
3\. Asset Sale: Sell parts of the company to investors if necessary.  
4\. Leadership Changes: Appoint a new [chief executive officer (CEO)](https://www.investopedia.com/terms/c/ceo.asp) to implement changes.  
5\. Implement Alterations: Adjust procedures, technology, and locations as needed.  
6\. Manage Workforce: Address overlapping roles, which may lead to layoffs.

> **Important**
>
> Companies restructure their finances or operations, often during a financial crisis.

Restructuring can be tough as it adjusts internal and external structures and may result in job cuts. But once it is completed, restructuring should result in smoother, more economically sound business operations.

Once employees adjust to changes, the company may achieve goals with better production efficiency. However, not all restructurings succeed. Sometimes, a company may need to admit defeat and begin selling or [liquidating](https://www.investopedia.com/terms/l/liquidation.asp) assets to pay off its creditors before permanently closing.

## Financial and Strategic Considerations in Restructuring

Restructuring costs can rise quickly due to cutting product lines, canceling contracts, eliminating divisions, writing off assets, closing facilities, and relocating employees.

Entering a new market, adding products or services, training new employees, and buying property result in extra costs as well. New characteristics and amounts of debt often result, whether a business expands or contracts its operations.

## Case Study: Savers Inc.'s Restructuring Journey

In late March 2019, Savers Inc. the largest for-profit thrift store chain in the United States reached a restructuring agreement that cut its debt load by 40% and saw it taken over by Ares Management Corp. and Crescent Capital Group LP.

The out-of-court restructuring, which was approved by the company's [board of directors](https://www.investopedia.com/terms/b/boardofdirectors.asp), includes refinancing a $700 million first-lien loan and lowering the retailer's interest costs. Under the deal, the company's existing term loan holders get paid in full, while senior noteholders swapped their debt for equity.

## What Are the Different Types of Restructuring?

A business can restructure in many different ways. The different types of restructuring include legal restructuring, turnaround restructuring, cost restructuring, divestment, spin-off, repositioning restructuring, and mergers and acquisitions.

## Does Restructuring Mean Layoffs?

Generally, when a company restructures, it lays off some of its employees. This is typically so because a restructuring involves downsizing, which can include closing some groups, merging others, and generally looking to become more efficient and cut costs.

## How Many Times Can a Company Restructure?

There is no legal limit to how many times a company can restructure. A company can decide to change its operations as many times as it deems necessary in order to become more efficient and cut costs. That being said, restructuring is a complicated process that involves a lot of time and strategy, and so is not a process to be done lightly or often.

## The Bottom Line

Restructuring is a critical corporate action for companies facing financial difficulty or looking to improve efficiency. By modifying debt obligations, operations, or structure, a business aims to better its prospects. The process often involves reducing debt through consolidation or asset sales, and it may include hiring new leadership. While restructuring can result in painful job cuts and altered operations, it is designed to lead to long-term financial stability and operational efficiency. However, not all restructuring efforts succeed; some may end with liquidation if a turnaround fails. Individuals involved in or affected by corporate restructuring can consider these elements to understand potential impacts on businesses and their employees.

> **Article Sources**
>
> 1.  S&P Global Market Intelligence. "[Savers Agrees to Restructuring Deal With Ares, Crescent Capital](https://www.spglobal.com/marketintelligence/en/news-insights/trending/fOjm5-QoCN4wioRuXg8Rdg2)."