How does Financial Restructuring Help Maximize Business Value?

Businesses in distress must follow the ongoing trends to leverage financial restructuring.

FREMONT, CA: Businesses in distress often have too many debt-related payments and payments related to contractual obligations such as leases and pensions relative to their operating cash flow. It can be attributed to the fact that a misalignment characterizes the company's capital structure with the current enterprise value result of its current capital structure. Any catalyst can result in distress and force restructuring in a business. However, businesses that face a combination of several catalysts are likely to be the most vulnerable.

Let us know the trends that drive financial restructuring.

Inflation pressure on small margin businesses: Small margin businesses in many industries have been affected by the rapid rise in inflation and the national shortage of employees. There are no signs that these problems will diminish in the coming years, and their viability may even become compromised.

More corporate debt restructuring: As the COVID-19 pandemic began to spread into the rest of the world, businesses began to accumulate a tremendous amount of debt. It is likely that in the coming years, many companies will again convert that debt into equity for lenders and investors. Any trend in this direction will likely continue for some time.

Increased merger and acquisition activity: In the coming years, expect to see many more mergers and acquisitions across various industries. This is because corporate liquidity fuels a glut of cash in the market. It is also possible for this to lead to a paradigm shift, in which asset values increase substantially as a result of this.

Continued consolidation in various industries: In line with this trend, there has been an increase in the number of companies buying and selling, as larger companies strive to benefit from economies of scale while smaller companies strive to grow their product lines and services.

Pay-forward lending trend grows: A recent study found that there was a rise in consumer debt in recent years and a boom in the fintech sector. This has resulted from retailers offering consumers fintech-based buy now and pay later plans rather than channeling purchases through credit cards.