Continuous organizational learning is necessary to stay up to date. Organizations that cannot or will not learn will become obsolete. Leaders must periodically examine the structure of their organization to assure that it continues to provide an environment for organizational learning. The points of leverage in organizations are the beliefs and worldview of their decision makers. The sense of purpose, vision and commitment of an organization's leadership play a critical role in the results it can accomplish.
Restructuring is the process through which an organization radically changes the contractual relationships that exist among its creditors, shareholders, employees, and other stakeholders. It is the corporate management term for the act of reorganizing the legal, ownership, operational, financial or other structures of an organization for the purpose of making it more profitable and efficient. Strategies of restructuring include portfolio restructuring, organizational structuring and financial restructuring.
Restructuring is an on-going process. It is a value tool for an organization to use in an attempt to maintain their goals and objectives. The choice of which strategy to use will depend on the area the organization has to improve, i.e. profitability, performance, or operation.
The basic nature of restructuring is a zero-sum “game”. It reduces financial losses, while reducing tensions between debt and equity holders to facilitate a prompt resolution of a distressed situation or a situation that requires change.
Our Restructuring Strategies
Organizational Restructuring Strategy
This type of restructuring will normally change the levels of management in the company, effect the span of control or shift product boundaries. There is also a change in production procedures and compensation associated with this strategy. Reduction in the work force is the main by-product that accompanies organizational restructuring and is the reason for the least positive impact on organizational performance.
Financial Restructuring Strategy
This type of restructuring is identified by changes are in the firm's capital structure. Changes can include debt for equity swaps, leverage buyouts (LBOs), or some form of recapitalization. In a financial restructuring that is in the form of a LBO, there is an immediate influx of free cash flows, organizational efficiency is enhanced and the company refocuses on the core business. Additionally, long-term performance of the organization is significantly improved after the LBO. Note that LBOs of divisions have greater improvement in efficiency than when the entire company is acquired.
Portfolio Restructuring Strategy
Companies involved in acquisitions, divestitures, or spin-offs are mainly using a portfolio restructuring strategy. This type of strategy includes selling off those business units that are drawing down operations or spinning off business units to raise more capital. The organization's objective is to regain its perspective on the core business. Portfolio restructuring has the best results when the firm uses the spin-off strategy and count on subsequent mergers rather than sell-offs.
It’s all about the health and future of the underlying assets! Sounds intuitive but amazingly often overlooked, particularly by stakeholders and investors – including Sovereigns who recently have found themselves in the role of proprietors of significant assets. These parties traditionally have not been as transparent or close to the asset as they should be given their credit/ investment exposure.
Pytheas is a catalyst for change in this regard – its restructuring teams, in collaboration with its investment banking and asset management teams, are focused on a holistic evaluation of assets, assessment of management teams, strategies and core processes and systems which are vital to the health of the underlying assets and any serious consideration of recapitalization opportunities.
Our restructuring teams consist of two types of experienced restructuring professionals: “generalists” with expertise cross-sector in core management processes, systems, procedures and “transformational managers” with demonstrated records of sustainable business transformation.
The “amend and extend” practices of traditional lenders are under considerable regulatory and governmental pressure – in both the U.S. and Europe, but particularly in the current European landscape and will be significantly curtail. New investors must take particularly care in evaluating with granularity potential assets.
Amongst other, Pytheas delivers transparency to existing stakeholders and investors in evaluating and “fixing” the underlying assets.