Financial Restructuring Strategy

This type of restructuring is identified by changes in the firm’s capital structure. Changes can include debt for equity swaps, leverage buyouts (LBOs), or some form of recapitalization. In a financial restructuring that is in the form of a LBO, there is an immediate influx of free cash flows, organizational efficiency is enhanced and the company refocuses on its core business. Additionally, long-term performance of the organization is significantly improved after the LBO. Note that LBOs of divisions have greater improvement in efficiency than when the entire company is acquired.