What typically triggers a company to engage in restructuring?

A company typically engages in restructuring primarily due to financial distress. This often occurs when a company is unable to meet its financial obligations, faces insolvency, or experiences significant losses that jeopardize its operations or market position. Financial distress can be triggered by various factors such as declining sales, increased costs, poor management decisions, or economic downturns.

When a company is in financial distress, restructuring becomes a viable strategy to realign resources, reduce liabilities, and improve financial health. This can involve debt restructuring, negotiations with creditors, asset sales, or changes in operational strategy to stabilize the business and set the foundation for future growth.

While increased sales revenue, regulatory changes, and new product launches can impact a company’s operations and strategy, they do not typically serve as direct triggers for restructuring. Instead, such positive developments usually suggest a company is on stable ground rather than in need of reorganization.