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Offload or overhaul?

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 Matthew Tait argues that now is actually an ideal time to restructure since interest rates are low yet economic indicators are increasingly positive. “Mending your roof when the sun is shining is more sensible than mending it when it’s raining,” he says.

This is an extract from the Finance & Management Magazine, Issue 217, January 2014.

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