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Why would corporate restructuring be necessary if a firm has been properly managed?

Why would corporate restructuring be necessary if a firm has been properly managed?


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Answer #1

There are various types of corporate restructuring. For example:

  • Mergers or Amalgamation.
  • Divestiture
  • Spin off
  • Reduction of Capital
  • Buy back of Securities

Corporate restructuring is done to realign the organisation's business to improve the performance and make it more profitable. Corporate restructuring is not necessarily done when an organisation is poorly managed. It can be done even when a firm is being properly managed. This is done in order to alter organisation's capital structure, portfolio or its focus of business, etc. This gives the business an edge over its competitors, provide better and strong financial control, etc. Corporate restructuring is also necessary in order to give effect to change in technology by way of upgradation or change in business model due to change in demand pattern. The ultimate effect of such corporate restructuring is enhancement of the value of business.

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