Corporate Restructuring is a topical point in the media at present, and based on a plethora of economic forecasts, we will likely be seeing it a lot more over the coming months.
But it is often misunderstood.
This short post aims to provide a high-level overview of the topic in the hopes that the casual reader can comprehend what exactly Corporate Restructuring means for an organization.
Let’s start by defining the term. Corporate Restructuring is essentially when a company changes or restructures, its financial, legal, or operational structure in order to improve efficiency. Although not all of the time, it is predominantly done when a firm is in distress.
To fully comprehend Corporate Restructuring, I must explain the two distinct umbrella terms which segment the field:
1) Formal Corporate Restructuring-
This is when you enter a formal and standardized procedure to restructure or reorganize your firm. Often times this includes specific legal insolvency proceedings. In the USA, examples of formal restructuring include Chapter 11 bankruptcy and Chapter 7 bankruptcy. An example of formal corporate restructuring is the infamous chapter 11 bankruptcy of Lehman Brothers HoldingsInc in 2008. Major Consulting firms like KPMG, PwC, Alvarez & Marsal and Alix Partners typically dominate Financial Advisory in the formal corporate restructuring space. (Although certain Investment Banks also operate in this space). This is also supplemented by firms providing legal advice and this is dominated by Skadden, Akin, and Kirkland & Ellis.
2) Informal Corporate Restructuring-
This is when you arrange your company in a novel unsystematic manner based on generally improving the firms performance. Oftentimes this takes the form of a major change in organizational structure and a restructure of capital structure. A pertinent example of this is the recent reorganization of Netflix and the new format of having the film department organized by genre rather than the standard format they had beforehand. While the major restructuring consultancy firms continue to do well here, Investment Banks such as Houlihan Lokey, PJTPartners, and Evercore are also prominent fixtures. Similarly, major law firms like Skadden, Akin, and Kirkland & Ellis dominate the market for informal corporate restructuring legal advice.
In conclusion, this is certainly a vast topic. A short blog post cannot begin to explain such a dynamic and complex field. However, my hope is that after reading this, whether a financier or not, you can leave with a baseline understanding and appreciation of Corporate Restructuring and the key players which dominate the market.
