Choosing to restructure instead of liquidating a company can be a strategic decision aimed at preserving the business and maximizing value for stakeholders.
Below are several benefits of restructuring;
Restructuring promotes business continuity since it allows the company to continue operations, maintain its market presence, and avoid the negative impact of a sudden closure. By continuing operations, the company can retain its customer base, which is often crucial for long-term success.
Restructuring helps a firm maximize value by enabling the company to use its assets more efficiently, potentially generating higher value than selling them off in a liquidation scenario. A successful restructuring can restore profitability and enhance the company’s value, benefiting shareholders and other stakeholders
Restructuring also comes in handy in debt management since it often involves renegotiating debt terms, which can lead to reduced interest rates, extended repayment periods, or even partial debt forgiveness. Creditors may prefer restructuring over liquidation as it offers a chance to recover more of their investment over time.
Employee retention is also achieved through restructuring. By keeping the business operational, job preservation is achieved which in turn ensures the company retains valuable skills and experience that are critical for its recovery.
Restructuring, when executed effectively, is a viable alternative to liquidation, preserving the company’s operations, maximizing value, and benefiting stakeholders in the long run. It however requires a well-thought-out strategy, strong leadership, and the cooperation of all parties involved.
By addressing the root causes of financial distress and implementing comprehensive changes, a company can emerge from restructuring stronger and more competitive.
