1. Restructuring strategies involve divesting some businesses and acquiring others so as to put a whole new face on the company’s business lineup.
2. Performing radical surgery on the group of businesses a company is in becomes an appealing strategy alternative when a diversified company’s financial performance is being squeezed or eroded by:
a. Too many businesses in slow-growth, declining, low-margin, or otherwise unattractive industries
b. Too many competitively weak businesses
c. Ongoing declines in the market share of one or more major business units that are falling prey to more market-savvy competitors
d. An excessive debt burden with interest costs that eat deeply into profitability
e. Ill-chosen acquisitions that have not lived up to expectations
3. Restructuring can also be mandated by the emergence of new technologies that threaten the survival of one or more of a diversified company’s important businesses or by the appointment of a new CEO who decides to redirect the company.
CORE CONCEPT: Restructuring involves divesting some businesses and acquiring others so as to put a whole new face on the company’s business lineup.
4. Candidates for divestiture in a corporate restructuring effort typically include not only weak or up-and-down performers or those in unattractive industries but also units that lack strategic fit with the businesses to be retained, businesses that are cash hogs or that lack other types of resource fit, and businesses incompatible with the company’s revised diversification strategy.
5. Over the past decade, corporate restructuring has become a popular strategy at many diversified companies, especially those that had diversified broadly into many different industries and lines of business.
6. Several broadly diversified companies have pursued restructuring by splitting into two or more independent companies.
7. In a study of the performance of the 200 largest U.S. corporations from 1990 to 2000, McKinsey & Company found that those companies that actively managed their business portfolios through acquisitions and divestitures created substantially more shareholder value than those that kept a fixed lineup of businesses.
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