Reasons for Corporate Restructuring
1. Lack of Profits: The main reason for the corporate restructuring is that the company is unable to make enough profits, which is required for the survival of the company. Sometimes, the management makes wrong decisions regarding the new product or new division, which leads to poor performance, or with the change in customer needs, there is a decline in the profit level, which can lead to restructuring.
2. Cash Flow Requirement: Generally, the sale of an unproductive project can result in a significant cash inflow for the company. If the company is facing difficulty in getting finance, it can dispose of its assets to raise money and reduce debt.
3. Changing Strategy: Sometimes, the struggling organisation tries to improve its performance by reducing divisions and subsidiaries that are inconsistent with the main strategy of the company. These divisions and subsidiaries can not strategically fit into the long-term vision of the company. Thus, the company must focus on the core functions and dispose of its assets to buyers.
4. Long-Term Growth: The restructuring helps the company achieve long-term success by positioning itself by expanding its product range, accessing new markets, or acquiring new technology.
5. Improves Financial Performance: Restructuring helps the company improve its financial performance by decreasing costs, improving revenue, or enhancing profitability.