21 September 2021

Is it time to restructure your business?

Services:

Expansion & Improvement

Restructuring a business periodically is certainly not a new practice. It’s part and parcel of coping with changing market realities and realigning your business and personal goals. The last 18 months have however brought this conversation into sharper focus for many business owners.

In essence, restructuring is about managing risk. It’s about working out how you can future proof or build resilience in your business so that you can keep your plan on track or indeed accelerate it.

Daniel Morgan tells us what the benefits are and what the most common forms of restructuring are today.

 

Demergers

Demergers are used to separate out various parts of a business and are undertaken for a wide variety reasons. Most commonly, shareholders may want to:

  • streamline operations or develop different parts of a business in different directions under separate ownership
  • ring-fence liabilities
  • manage shareholder disputes or
  • Work towards exit planning and consequently structure their company in a way that may be more attractive to buyers.

Establishing a holding company

If you hold your core assets (including cash reserves) in your trading company or on one single balance sheet, you’re leaving your business open to a degree of commercial risk. Creating a group structure enables you to ring fence assets in a holding company which protects them from the commercial risks of any trading or subsidiary company within that group. There are also tax advantages particularly in the case of property held within a group, where the transfer of property between companies does not trigger Stamp Duty.

 

Consolidating companies into a group structure

Occasionally businesses that have historically operated separately may reach a point where it makes sense for them to now work together. Consolidating or simplifying structures can drive efficiency and cost savings.

 

Share reorganisation

I see a lot of share reorganisations being undertaken at present as a means to attract new investment or as part of clients’ talent acquisition and retention activities. The reorganisation of shares typically includes alterations to rights attached to shares, purchasing of shares or capital reductions. Share reorganisations are often undertaken as part of wider growth or exit planning.

Whether driven by the need to save costs, become more profitable, take advantage of tax reliefs or as part of exit planning – restructuring is about making the right choice for your business at the right time. As with all significant decisions, it is import to talk your options through with someone who understands the context and is able challenge your assumptions and help you assess the implications.

 

If you would like to have an exploratory chat about whether restructuring activity is right for you and your business, please get in touch.

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