{"id":16333,"date":"2021-06-14T16:16:44","date_gmt":"2021-06-14T16:16:44","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=16333"},"modified":"2022-04-25T10:44:44","modified_gmt":"2022-04-25T10:44:44","slug":"reasons-for-restructuring","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/reasons-for-restructuring\/","title":{"rendered":"Reasons for Restructuring"},"content":{"rendered":"<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/XBra1Jp5JAU\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\r\n\r\n<p>Sometimes mergers do not work out as expected, or the companies fail to get the synergies they had estimated, and they end up undoing the merger or restructuring. The following are some of the common reasons for restructuring:<\/p>\r\n<ol style=\"list-style-type: lower-roman;\">\r\n\t<li><em><strong>Change in strategic focus:<\/strong> <\/em>The company\u2019s management may hope to increase profitability by changing their strategy and eliminate divisions or subsidiaries that are not part of their core business.<\/li>\r\n\t<li><em><strong>Poor fit:<\/strong> <\/em>A company will decide that a particular division is a poor fit within the overall company or it does not justify continued investment.<\/li>\r\n\t<li><em><strong>Reverse synergy:<\/strong> <\/em>The market may undervalue some divisions because of poor performance, and the separation of the two will be worth more than when combined.<\/li>\r\n\t<li><em><strong>Financial or cash flow needs:<\/strong> <\/em>During economic downturns, managers may sell a portion of the company to increase their cash flows.<\/li>\r\n<\/ol>\r\n<blockquote>\r\n<h2>Question<\/h2>\r\n<p>Which one of the following is <em>least likely<\/em> a reason why companies restructure?<\/p>\r\n<ol style=\"list-style-type: upper-alpha;\">\r\n\t<li>Change of strategic focus.<\/li>\r\n\t<li>Good fit.<\/li>\r\n\t<li>Financial or cash flow needs.<\/li>\r\n<\/ol>\r\n<h4>Solution<\/h4>\r\n<p><strong>The correct answer is B.<\/strong><\/p>\r\n<p>If a division is a good fit, there is no need for a company to restructure.<\/p>\r\n<p><strong>A is incorrect. <\/strong>\u00a0A change in strategy can result in a corporate restructuring.<\/p>\r\n<p><strong>C is incorrect. <\/strong>Financial or cash flow needs may push a company to sell a portion of itself to increase cash flows.<\/p>\r\n<\/blockquote>\r\n<p>Reading 18: Mergers and Acquisitions<\/p>\r\n<p><em>LOS 18 (l) Explain common reasons for restructuring.<\/em><\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>Sometimes mergers do not work out as expected, or the companies fail to get the synergies they had estimated, and they end up undoing the merger or restructuring. The following are some of the common reasons for restructuring: Change in&#8230;<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[102,346],"tags":[216,344,384,400],"class_list":["post-16333","post","type-post","status-publish","format-standard","hentry","category-cfa-level-2","category-corporate-finance-cfa-level-2","tag-cfa-level-2","tag-corporate-finance","tag-reading-23-mergers-and-acquisition","tag-reasons-for-restructuring","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Reasons for Restructuring - CFA, FRM, and Actuarial Exams Study Notes<\/title>\n<meta name=\"description\" content=\"Sometimes mergers do not work out as expected, or the companies fail to get the synergies they had estimated, and they end up undoing the merger or restructuring.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/reasons-for-restructuring\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Reasons for Restructuring - 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