What Is Corporate Restructuring? A Comprehensive Guide

The term “corporate restructuring” generates spine-tingling thoughts of mass layoffs and financial collapses. While it's true that corporate restructuring often takes place during economic downturns, the process of internal reorganization encompasses a wide variety of procedures that may be undertaken for a number of different reasons.

Corporate restructuring refers to the process of reconfiguring a company’s hierarchy, internal structure, or operational procedures. Companies undergo restructuring to achieve certain aims, such as to become more competitive or to respond to changes in the market.

This post explores what corporate restructuring is and how it functions.

How Does Corporate Restructuring Work?

Corporate restructuring often takes months to see through from beginning to end. While the actual process can be quite complex and involves a large number of internal and external stakeholders, you can simplify it down to three broad steps.

1. Identify Your Objectives

Prior to undertaking any course of action, it's important to articulate exactly why your company is going to be restructured. Consider the following real-world examples:

• General Motors underwent corporate restructuring in 2009 to shed its debt, cut operating costs, and become more competitive¹
• Procter and Gamble restructured between 2012 and 2015 with the intention of recentering its efforts on core business holdings²
• Eastman Kodak undertook reorganization efforts in 2012 as part of its bankruptcy proceedings;³ it divested its legacy systems and turned its focus toward growth areas

Once you know what you're trying to accomplish, planning the process is a simple matter of working backward to produce a roadmap. You should always be as specific as possible when determining your objectives. Rather than simply stating that you need to reduce your operating costs, for instance, set a target amount for those costs.

2. Form a Plan

Outline each strategy and action that you intend to perform in pursuit of your goals. For example, if you're undertaking a divestiture corporate restructuring, identify each piece of equipment that you intend to sell. It's also a good idea to draw up a short list of potential buyers. Ask your compliance department for assistance to help you stay on the right side of the law.

3. Set it in Motion 

Implementation can take many forms. Depending on the corporate restructuring strategy that you intend to pursue, you may need to issue new equity, sell existing assets, hire, conduct layoffs, create new organizational guidelines, and more.

In charting the course for a corporate restructuring, pay careful attention to three key areas:

1. Legality

Legal frameworks govern every restructuring decision and establish operational boundaries throughout the process. Employment regulations determine permissible workforce adjustments and mandate specific notification procedures for position eliminations or role modifications. Securities laws require public companies to follow strict disclosure protocols when announcing material changes to shareholders. Existing contractual obligations—including lease agreements, supplier arrangements, and debt covenants—often impose significant constraints on restructuring options and timing.

2. Finances

Financial considerations drive strategic restructuring decisions and determine implementation feasibility. Companies require sufficient liquidity to maintain operations during transitional periods, often necessitating additional capital through debt financing, asset divestiture, or equity issuance. Credit arrangements become increasingly complex during restructuring, as lenders typically impose higher interest rates and stricter covenants when assessing elevated risk profiles. Comprehensive financial modeling and scenario analysis become essential tools for evaluating restructuring alternatives and supporting executive decision-making throughout the process.

3. Communication Strategy

Effective communication determines whether stakeholders view restructuring as strategic repositioning or an organizational crisis. Internal messaging must address employee uncertainty through clear updates, while external communications with investors, customers, and suppliers require careful sequencing. Regulatory disclosure requirements often dictate timelines, particularly for public companies. Coordinating legal obligations with strategic messaging maintains stakeholder confidence throughout the process.

Why Business Restructuring Is Important

Businesses restructure for varied reasons, one of the most common of which is to cut costs.⁴ Methods for achieving this goal include the following:

• Eliminating redundant processes 
• Consolidating debt
• Streamlining and optimizing routine operations 

Businesses might also reorganize in anticipation of an acquisition or merger. The process allows a company to integrate into its new partner business more efficiently.⁵

In the event of an industry-wide change, businesses may restructure to stay competitive. This may take the form of an organizational change designed to enhance efficiency by modifying the internal structure of the business. For example, a company may embrace a flat hierarchy, split up, or consolidate departments.⁵ A business might also adjust its internal structure to ensure regulatory compliance with new legislation.⁶

What Happens to Employees When a Company Restructures?

Employee impact during corporate restructuring remains a primary concern for workforce planning. The effects on personnel depend significantly on the restructuring type, organizational scope, and implementation approach.

Role Eliminations and Changes

Restructuring often involves position elimination, with middle management layers frequently targeted as organizations pursue flatter hierarchical structures and operational efficiency.

Simultaneously, however, restructuring creates new opportunities. Organizations entering new markets or implementing technological innovations require different skill sets and competencies. Retained positions typically experience expanded responsibilities and modified reporting relationships.

New Career Opportunities

Strategic employees recognize restructuring as potential career advancement. Organizations prioritize adaptable personnel who demonstrate flexibility and embrace expanded responsibilities. High-performing individuals often receive promotions or broader organizational influence during transitions.

Cross-functional expertise becomes particularly valuable during restructuring periods. Employees with diverse operational knowledge provide greater organizational utility when companies consolidate redundant functions.

Retraining and Development

Forward-thinking organizations invest substantially in employee development during transitions. This includes funding professional training programs and allocating time for skill acquisition.

Operational restructuring frequently involves technology implementation, necessitating comprehensive employee training on new systems and processes. Organizations that provide robust transitional support typically achieve better implementation outcomes.

Impact on Morale

Restructuring generates organizational stress that affects retained employees beyond direct position changes. Future uncertainty impacts productivity levels and interpersonal workplace dynamics.

Effective change management becomes essential during corporate restructuring to address employee concerns and minimize resistance. Organizations maintaining transparent communication practices throughout restructuring processes typically preserve higher morale and engagement levels.

Types of Corporate Restructuring

There are multiple ways to approach corporate restructuring. Ultimately, the strategy you pursue depends on the specific needs and goals of your organization.

Organizational Restructuring

Organizational restructuring involves changing a company's internal hierarchy.⁷ The process may result in the elimination of certain roles and the merging of others. The company may create new jobs, departments, and teams while eliminating others, which might cause shake-ups in working relationships. Companies typically undertake all of these changes with the end goal of enhancing productivity, efficiency, and communication.

Operational Restructuring

Operational restructuring refers to the practice of streamlining routine processes.⁸ This may involve embracing automation technology and/or eliminating redundant procedures. The business may outsource certain tasks for cost-saving purposes or to allow the company to focus its energy more intensely on core processes.

Divestitures

To divest of something simply means to get rid of it. A divestiture involves the sale or spinning off of underperforming or non-core assets, subsidiaries, or divisions.⁹ This may include selling heavy machinery, real estate, or intellectual property to raise cash. A business operating in multiple markets may spin off certain departments in order to focus on its core offering. For example, a company that owns both pencil and pen factories may establish the pencil division as a separate company to enhance operational efficiency.

Mergers and Acquisitions (M&A)

The mergers and acquisitions process involves two parties joining to create a single company. One or both parties commonly restructure to accommodate the new business.¹⁰ They may merge, reduce, or eliminate departments and roles with similar functions. For example, after an M&A, the new company likely won't need all of the marketing staff from both companies. In anticipation of this, companies may reorganize their internal hierarchies after the sale has been completed, ensuring a smooth and profitable integration.

Joint Ventures and Strategic Alliances

A joint venture or strategic alliance bears some superficial similarity to an M&A. However, these processes are less invasive and don't entail an actual sale or joining of the two companies. Instead, they are partnerships in which two or more businesses choose to pair or share resources to assist with specific business goals.¹⁰

Financial Restructuring

Financial restructuring seeks to enhance a company's financial health.¹⁰ Common methods include the following:

• Debt restructuring: A company consolidates its debt or negotiates lower interest payments
• Debt for equity swaps: A company sells equity in exchange for debt reduction from its creditors
• Equity financing: A company issues new equity to raise capital

Legal Restructuring

Legal restructuring involves modifying a company's legal framework to optimize liability management, enhance regulatory compliance, or achieve tax advantages. Organizations may establish new subsidiaries, consolidate existing legal entities, or transition between corporate forms.

This approach facilitates entity consolidation or creation to segregate distinct business operations. Companies establish holding company structures to maximize tax efficiency and operational flexibility. Legal restructuring also ensures compliance alignment when regulatory requirements evolve across different jurisdictions.

Popular Examples of Corporate Restructurings

Real-world corporate restructuring cases demonstrate practical implementation across various business contexts. Some organizations pursued restructuring to address financial distress, while others sought competitive repositioning or core business focus.

General Motors (2009)

GM's bankruptcy restructuring represented one of the largest corporate reorganizations in U.S. history.¹¹ The company eliminated substantial debt obligations, reduced operational costs, and discontinued entire automotive brands, including Pontiac and Saturn. The restructuring involved facility closures and comprehensive contract renegotiations with unions and suppliers.

IBM (2010s-Present)

IBM has executed multiple restructuring initiatives over two decades, systematically divesting from lower-margin operations. The company sold its personal computer division to Lenovo and subsequently divested server hardware operations. Most recently, IBM spun off its infrastructure services division.¹²

Each restructuring phase repositioned IBM toward higher-margin business segments, transitioning from manufacturing operations to software and consulting services.

Netflix (2018)

Netflix restructured its content operations into two distinct divisions. One division managed content licensing from external studios, while the other focused on original programming development and production.¹³

This organizational restructuring enhanced Netflix's competitive positioning against Disney and other media companies withdrawing their content from the platform.

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