Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Restructure

What it is:

Restructure, or restructuring, refers to the management process of reorganizing a company to make it more profitable. 

How it works (Example):

During a major transition, a buyout or a bankruptcy, for example, the management may consider restructuring a company.  A restructuring may include a variety of measures to eliminate diseconomies of scale, such as reorganizing and streamlining the management and operations, integrating management teams from the buyers or new owners or spinning-off, closing, or streamlining various operating units within the company.  It may also include a debt restructuring, involving renegotiating loan terms, conditions, and covenants that may be onerous or leave no room in the company's cash flows.  A related example might be a financial restructuring which may involve a repositioning of equity within the company, such as purchasing outstanding shares, creating new classes of stock, or going public or even "going private."

Restructuring usually involves new management, new capital, and a new opportunity to rethink the business organization and plan. A successful restructuring will usually result in a higher valuation of the company.

Why it Matters:

A restructured company, at least theoretically, is more focused, more efficient and more profitable.  However, a restructuring may affect and even dilute the stock values of the current stockholders of a company.

Related Terms View All
  • Life-Plus-Ten Option
    To understand how this works, let's assume you'd like to invest in an annuity that, after...
  • Market Letter
    Market letters offer advice to investors interested in investing in a particular market...
  • Par
    Let's assume Company XYZ issues $10 million in bonds to the public. It may do so by...
  • Pale Recession
    Former Federal Reserve Chairman Alan Greenspan coined this term in a 2008 television...
  • Realized Gain
    Let's assume you own 100 shares of Company XYZ that you purchased for $1,000. If the...