Offload or overhaul?

 Published in Finance & Management

There is no simple formula for FDs looking to restructure in a time of recovery, as Sally Percy discovers

As the economic indicators continue to point towards a sustained recovery, organisations are turning their attention towards parts of their businesses that they may not need to keep during growth. Underperforming units and subsidiaries that may have been patched up and dragged through the recession may now begin to look increasingly superfluous. Restructuring or disposal may be the solution, but both come with cost – and risk – attached.

So how can management accurately assess whether a restructuring is necessary or if the business can continue unchanged? And how can they identify those areas ripe for attention? “A restructuring will either be caused by a necessity, in which case you have no choice, or it will be caused by recognition that a business can make better cash returns and better profits through a restructuring,” says Simon Poulton, a former group finance director of ARC International who is now an interim CFO. “If the economics of restructuring are positive, there is little justification for not doing it.”

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