Restructuring your business — reorganizing your employees, products and financials
1. Is in financial or legal distress.
2. Wants to re-focus its core business holdings.
3. Needs to adapt to rapid growth and organizational change.
- Evaluate your problems - Analyze your situation to determine if your problems have solutions. Are your company's ailments a symptom of its organization, or are they a sign that your business simply isn't viable? Restructuring can save a salvageable business, but it can't help a failed idea succeed.
- Develop a plan - Create a restructuring plan with which to grow your business and consolidate it. Share the plan with your managers, staff and important third parties, including your creditors and vendors.
- Realign your team - Restructuring should include reorganization of your employees. Start at the top with an evaluation of your management team and work your way down the company totem pole. Replace weak members of your team and eliminate extraneous positions.
- Restructure your debts - Use the restructuring process to put your finances in order. Take out new loans, if necessary, to fund restructuring, but work with your accountant to make sure your fiscal plans are sound.
Tips & Tactics
• Lower costs by building intimate relationships with a small number of vendors. Keep them abreast of your company's changes and work with them to maintain affordable service as you move forward with reorganization.
• Restructuring can be as simple as moving things around; be willing to shift financial and personnel resources from less profitable projects to those that make you the most money.
• As you restructure, maintain high customer service standards by answering clients' questions promptly and honestly. Instead of hiding changes from your customers, use restructuring as a means for communicating with them.
• Consider strategic restructuring, whereby you'll partner with another business - via a merger or joint venture, for instance - in order to save yours.
• A restructured company needs entirely new policies and procedures. Wipe your slate clean and meet with remaining employees often to present company goals and get input on company culture.
The economy today is not stabilized. Even big companies have to confront the ups and downs that come their way. But the only thing that keeps them going is survival. They have to survive in the market and progress swiftly or gradually. One strategy to advancement is that of mergers between companies. There are numerous mergers that take place locally but they do not have a great effect on the market especially the consumers. But the mergers that take place at the national or international level have a profound impact on the economies of the concerned countries.
There are different reasons behind a merger of two or more companies. But first of all there exist diverse types of mergers.
a) Horizontal Mergers - two competing companies conjoin to form a single large company. The companies in horizontal mergers are selling the same product in the same market and so are contenders to each other. Such a merger can have a tremendous influence on the market from creating monopoly to escalating prices of the commodity.
b) Commission - the market and the consumers keep a hawks eye on such mergers and at times detains the companies from merging in the interest of the people.
c) The Vertical Mergers - are the mergers between a supplier and the distributor company of the supplies. This is an anti competitive merger but can be highly beneficial to the company. It is because the distributor will no more have to pay for the manufacturing of the supplies, it gets the product at the base price. So there is good cost saving due to this. Vertical merger also rules out lot of competition from the market.
d) Market Extension Merger - between the companies selling same product but in different markets. This merger enhances the market for the two companies since they now act as one sole company.
e) Product Extension Merger is like the one between an eminent company making motor parts and another that makes their own cars. So, the companies involved here sell different but more or less the same product in the same market. This merger promotes the sale of both the companies significantly.
f) Conglomeration is a merger where the concerned companies have nothing in common to sell.
There are various reasons behind merger of companies.
a) Synergy factor prompts the merger of most of the companies. The synergy in business pertains to the cost saving and revenue enhancement. The companies after merger decrease the staff keeping only the skilled labor, work with a single managing director, CEO etc. So there is good outlay saving. Moreover the economy of the sale i.e. the purchasing power of the company booms after merger.
b) To increase the output and rule the market- many mergers are made with the intention to oust the competition and jointly rule the market. This presupposes healthy relations between the competing companies.
c) Mergers also take place when a company is not able to perform well due to some or the other cause like the lack of required investment in the form of capital, tremendous competition etc. In such a situation this company can merge with one its parent company or any other company that has faith in the prior goodwill of the declining company and in its potential to grow and enhance. So companies also merge in order to overcome their internal inconsistencies.
d) Many a mergers besides economically are also politically driven.
e) Acquisitions which imply taking over of one stronger company with the other weaker one are also at times veiled by the name of merger.
However, the directors who plan to merge their companies should actually contemplate over it, keeping in mind all the possible pros and cons. They must seek advice from neutral financial consultants who do are more inclined towards the welfare of the company and not their own. Their own benefit is also hidden in a merger since the wages of the employees increase with the advancement due to merger. So it is recommended to take advice from all those who are the well wishers of the company before taking any concrete step in this direction.