Investment Banking Restructuring and Reorganization

This article is the 8th tutorial out of the 9th post tutorial on Investment Banking Basics Tutorial On Investment Banking BasicsInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more.

  • Part 1 – Investment Banking vs Commercial BankingPart 2 – Equity ResearchPart 3 – AMCPart 4 – Sales and TradingPart 5 – Private Placements of SharesPart 6 – UnderwritersPart 7 – Mergers and AcquisitionsPart 8 – Restructuring and ReorganizationPart 9 – Investment Banking Roles

Here, we discuss investment banking – restructuring and reorganization.

In this article, we discuss investment banking restructuring and reorganization.

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Investment Banking Restructuring and Reorganization Video

And we have also looked at Investment Banking Pitch BooksInvestment Banking Pitch BooksPitch Book is an information layout or presentation used by investment banks, business brokers, corporate firms, and others to provide potential investors with the firm’s main attributes and valuation analysis, which helps them decide whether or not to invest in the client’s business. A pitch book is also known as Confidential Information Memorandum, which is used by the firm’s sales department to help them sell products and services to a client.read more, bringing us to the last part of the investment banking restructuring and reorganization. If you look at investment banking restructuring and reorganization, this becomes very important in the context of those companies which are about to go bankrupt. They face margin pressure cash issues and may want to reorganize very quickly. Hence, they take help from top investment banks, or they may be investment banks that can help them strategically restructure the financial aspects of their equity and debt. So, investment banks have a larger role to play. Hence, there are two categories: reorganizing and restructuring.

Investment Banking – Restructuring

Let us now consider why investment banks are important for reorganizing or restructuring companies. So, why are these required? When is it applicable for different companies? Companies often may not pay to do good in their business and face cost pressure as they cannot pay their set-off cash obligations, which may be related to debt etc. So, they are a set of companies, let us assume, on the verge of bankruptcy. What can these companies do? they can opt for either of the two or mix for both, one known as restructuring and the other known as reorganization. For these two activities, investor bankers come in handy.

So, how restructuringRestructuringRestructuring is defined as actions an organization takes when facing difficulties due to wrong management decisions or changes in demographic conditions. Therefore, tries to align its business with the current profitable trend by a) restructuring its finances by debt issuance/closures, issuance of new equities, selling assets, or b) organizational restructuring, which includes shifting locations, layoffs, etc.read more and investment bankers can help? Let us say there is a huge debt piled up in ABC Co., so restructuring would mean selling off part of the assets to meet the cash obligation or paying off the debt that normally happens second. It could be converting a portion of debt into securities. So, those who are bondholders would get stocks in return for debt. It may also mean that one can sell the company entirely so investment bankers can help restructure the original deal with the financiers and find a way out between this. Primarily to rescue the firm from bankruptcy which will ultimately lead to nothing but sell company where you know only the debt holder may be able to recover the partial amount. So, this is where investment bankers can be handy.

Investment Banking – Reorganization

The second part involves reorganization. Reorganization means that you are reorganizing the company’s strategy altogether. Maybe earlier, the company was into emerging markets. Still, you probably may not have the appetite to pay for products we are into, so just realigning the strategy from emerging to developed markets can help. So, the investment bankers take the consultant role, analyze completion, support the management in the new focus areas and help them revive their financials. It may also lead to a change in administration. So, an investment bank, for a fee, performs reorganizationReorganizationReorganization refers to the legal process of modifying, merging, or acquiring a company and its assets. Typically undertaken to solve low-profit margins, reasons for revamping vary as per the firm’s needs. For instance, in 2017, Wall Street Journal had announced a major editorial reorganization to help the 128-year-old newspaper adapt to the requirements of digital news reporting.read more and restructuring. So, it can be a standard fee or a fee based on performance, so this is where investor bankers play a good role to look at. So, with this, we hope that you now fully understand restructuring. So, we hope you know this provided a good glimpse of the different kinds of functions of investment bankingFunction Of Investment BankingInvestment banks perform various functions for their clients, including initial public offerings (IPOs), mergers and acquisitions, risk management, equity research, structuring of derivatives, merchant banking, and investment management.read more.

  • What is Restructuring?Investment Banking DivisionInvestment Banking Analyst