Corporate restructuring is a general term used to describe major changes within a company. These changes usually affect basic business practices, redetermining who makes the major decisions in a company or how certain parts of its business plan are approached. The type of restructuring depends on the elements of the business being affected and the reasons that the restructuring is occurring.

Internal Restructuring

Corporate restructuring occurs based on the needs of the company. Internal restructuring typically occurs as a result of business analysis that shows a need for greater efficiency in the way business departments communicate and complete tasks. Sometimes a particular segment of the business will start to fail, and the company will need to reallocate resources in order to support it. Sometimes a business may have expanded to much, and needs to refocus on its core abilities. At other times a business may need to restructure its financial position in order to continue making profits. Often, restructuring plans are necessary simply to meet the constantly change demands of technology that competitors are embracing. Not all reasons for restructuring are negative, and many benefit employees as well as executives in the company.

Financial Restructuring

Financial restructuring deals with all changes the businesses makes to its debts and equity, including mergers, acquisitions, joint ventures and other deals. Generally these occur when a company joins or is bought by another company. Ownerships of the company, or at least some interest in the company, is transferred to another organization or group of investors. Actual business practices may remain unchanged.

Technological Restructuring

Technological restructuring occurs when a new technology has been developed that changes the way an industry operates. This type of restructuring usually affects employees, and tends to lead to new training initiatives, along with some layoffs as the company improves efficiency. This type of restructuring also involves alliances with third parties that have technical knowledge or resources.

Restructuring Methods

Restructuring methods are typically divided into expansion, refocusing, corporate control, and ownership structure. The last two, corporate control and ownership structure, apply mostly to financial changes and affect ownership. Corporate control, for instance, is a method where the company buys back enough shares to be able to make its own decisions again. Expansion occurs with acquisition, mergers, or joint ventures. Refocusing can take many forms, including business splits, sell offs of certain ventures, and general consolidation practices.