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Corporate restructuring strategies in postpandemic recovery

Crisis management considerations for distressed markets

Companies are facing a time of incredible change, opening up the rare opportunity to refresh corporate restructuring strategies. As customer behaviors, regulatory factors, and the entire business environment evolve throughout postpandemic recovery, learn how these crisis management tactics can help you reshape your organization’s future.

Restructuring reconsidered

Businesses now operate in a set of circumstances that has been reshaped by a pandemic. For some businesses, the need for change may be painfully obvious, and corporate restructuring strategies must be considered in the more narrow, traditional sense. But for other companies experiencing a milder postpandemic impact, there still may be a benefit in seeing their future through a restructuring lens.

Deloitte sees restructuring activities grouped into three segments along a continuum:

  • At one end are simpler measures that may be entertained by a company that has been disrupted, as indeed most companies are today due to the pandemic.
Seeing restructuring through a wider lens—and embracing the opportunities
  • In the middle are more aggressive steps appropriate for a business that has been more deeply disadvantaged by its current circumstances.
  • At the far end of the spectrum are measures for a company that’s clearly distressed, including those in need of the reorganization tools that fit within any narrow definition of restructuring.

 

Disrupted: Making small changes for a big impact

The dramatic changes the pandemic has brought to the business environment should prompt most companies to explore new ways to get the most effective returns from their resources, assets, and capital in a new environment.

For an organization that’s been disrupted postpandemic, the impact may be relatively fleeting, and revenue might be starting to recover. In such a situation, a company may want to refresh its go-to-market model, brand positioning, or other parts of its strategy. By being willing to rethink the business, leadership may find new ways to thrive amid shifts in customer behaviors, supply chain interruptions, or changes in capital requirements or availability. Where impacts are lasting, there may be reasons to redesign their corporate restructuring strategy.

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Disadvantaged: Embracing transformation

Where the disruption of a business or an industry has been more lasting or severe, a company may need to embark on more ambitious corporate restructuring strategies. The enterprise may not be responding yet to a distress situation, but it may be taking steps to avoid one postpandemic.

Some businesses may find they have been disadvantaged by changes in the operating environment, with their ability to bring products or services to market threatened or interrupted postpandemic. There may be a need to reset relationships—making big changes in the supply chain, for example, or developing new customer marketing efforts. There may be a need to rebalance the company’s financial and tax condition, strengthening the balance sheet, or making better use of available capital. A company may need to reconfigure its workforce, reducing the number of employees or dramatically changing the mix of job titles.

Distressed: Facing difficult decisions

Some companies may reach a level of strain that requires difficult issues to be addressed within their corporate restructuring strategies. Even at this point, though, the focus should remain consistent: This is about finding, preserving, and enhancing the value of the resources and assets of the organization postpandemic.

Should a company find itself significantly distressed, it becomes vital to reconnect with shareholders and debt holders, along with other stakeholders such as employees and customers. A company placed in distress due to the pandemic may now have to reconstruct itself, and that includes making changes in capital structure. If successful, these steps should lead directly to a longer-term mandate to restore faith in the company and its purpose, with customers first and foremost, but ultimately with all stakeholders.

Refresh your corporate restructuring strategy

The three categories of corporate restructuring strategies presented in this paper highlight the available tools (and potential benefits) a restructuring mindset can bring to a broad range of circumstances.

Understanding the levers that can be applied across the crisis management spectrum can help organizations embrace change and find opportunities, whether the disruption is mild or the distress is severe.

Seeing circumstances clearly and weighing the available restructuring tools may even help a company to better understand where it currently stands—and anticipate what comes next.

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