Corporate restructurings can also take place without the involvement of a bankruptcy court, saving the significant legal costs to both the private company and to the creditors of a formal court process.
A restructuring is an adjustment of ownership, operations, assets, or capital structure in order to improve operating performance, optimize capital structure, and enhance public perception. Before known as a simple balance sheet reconfiguration, restructurings now include a variety of financial transactions from mergers, asset sales and special dividends to share repurchases. Restructurings have been used to lever and de-lever the balance sheet, concentrate equity ownership, or realize value of a subsidiary.
As institutional investors become more active and vocal, corporate restructurings have been on the rise. In some cases, institutional investors wage proxy battles in order to enhance shareholder value.
Given the prevailing market conditions over the past three decades, hostile take over activity such as leveraged buyouts and hostile acquisitions have been on the rise. Nevertheless the value of acquired private companies is not always reflected in the stock price of the acquirer. Therefore, private companies have been focusing on improving core businesses, divesting poor performing assets and highlighting strong performers.