Corporate restructuring with an expert’s advice – an excellent tool for successful long-term business performance

How can a timely and professional corporate restructuring ensure the achievement of good results even in periods of “weak business years”?

During the time of the last economic crisis, whose aftermath the Croatian economy still very much feels even today, many entrepreneurs in the world and Croatia, have seen their positive business indicators, which have been improving or stable for a number of years, turn negative or at least worsen. The worsening is the consequence of market change impact which began a lot earlier. The aforementioned negative trends are the result of an absent timely reaction to market changes, which have in the end resulted in the negative influence of these changes in the surroundings and have materialised through financial indicators.

Factors (variables) that influence financial indicators can be internal and/or external. The impact of internal variables such as organizational structure, production processes and business strategy, equally affect financial indicators as do external variables which are caused by changes in the market, by tax policies but also by changes in consumer preferences.

In order to adapt its’ business to market changes and to proactively confront negative influences, the firm needs to actively and preventively identify and undertake the required measures of financial and operating restructuring.

Corporate restructuring implies activities which include (cumulatively or individually) legal, organizational, management, technological, financial and other alterations inside the firm with the goal of changing the current financial, operating and strategic conditions.

The aforementioned activities refer to the change of primary business functions inside the firm with the goal of decreasing the influence of limitations which the firm is confronted by. Thus, improving financial performance, securing ongoing development and long-term market survival of the company.

Unfortunately, many entrepreneurs do not recognize the need for restructuring early enough, which is necessary to ensure that the company continues its’ successful performance even in the case of market oscillations. Praxis has shown us that a company which is currently achieving a positive business result often cannot continue to do so in the future without adequate changes.

One of the reasons why such situations arise is the fact that for many entrepreneurs, in periods when the company is performing well and achieving positive results, it is unnatural to think about business changes and restructuring. There is a term for this case and it is called the illusion of prosperity.

Consequently, especially in Croatia, restructuring is most often undergone “forcefully” through pre-bankruptcy and bankruptcy procedures, and not due to timely and preventive entrepreneurs who use financial, operative or strategic changes to adapt their companies to continuous market changes. The most common reasons why restructurings occur are problems with solvency and liquidity, which compel entrepreneurs to undergo one of the forceful restructuring processes. 

Considering that entrepreneurs and owners of companies are often too close to the “problem” to adequately perceive and identify it, nowadays specialized experts are offered by the financial market who analyse certain indicators and can be of great assistance in identifying the need for restructuring and aiding in its implementation.

From everything above, we can conclude that the right time to think about corporate restructuring is not when the negative business effects are clearly visible and unavoidable. It is necessary to anticipate potential problems and act in a preventive manner. Moreover, with a timely analysis and by keeping track of internal and external business elements it is possible to ensure an adequate reaction by restructuring one or more business segments on a financial, operative or strategic level. By involving qualified experts, you can ensure that the whole process is professionally implemented and that the positive effects will enable the stabilization of long-term business performance.

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