Tao Perspective: Company Restructuring

Updated: May 28, 2020

In the recent situations of CoVid lockdown, it has caused disruption which makes the existing business models irrelevant. Changes in customer preferences along with changing regulatory landscape add further uncertainty. With pandemic disruption, every company is facing an impending threat of getting extinct, as its business operations, as well as its business portfolios, are no longer aligned to the market demands.

The investors, creditors, and shareholders are equally putting pressure on company management to deliver some shareholder returns if any. With the rising of activist investors, more and more companies are compelled to review their business models and operations to ensure they continue to stay afloat.

Hence in the coming months, corporate restructuring may become rampant in companies where the management and board are involved in restructuring activities to ensure companies focus on their core competencies and strategic strengths. However, many companies may recognize the need to restructure too late, when fewer options remain, and saving the company may be more difficult. Some research suggests that voluntary or preemptive restructuring can generate more value than restructuring done under the imminent threat of bankruptcy or a hostile takeover.

What do we understand by restructuring in the Tao perspective? These hexagrams from IChing can provide some insights while dealing with painful situations. There are still more possibilities in the rest of the hexagrams that can apply to the eight types of restructuring. I have only picked two of each kind of restructuring.

  • Mergers & Acquisitions: Integrating the administration, operations, technology, and/or products of two firms.

乾 Chien: The rise and fall of power will be critical in this reading. The stronger one will comprehend more reliable power and control. The excellent work will spill over to the newly joined.

師 Shi: During acquisitions, companies have to be united as a system to ensure a chance for victory. The more influential leader will emerge who has the foresight and agility in the use of strategy according to the situation.

  • Legal: Changing the legal structure of a firm such as ownership structure.

訟 Song: The necessity of conflict. Seek for mediation and avoid conflict whenever possible.

同人Tong Ren: Conduct fair and justice when dealing with issues. Mediating between different ideas and consolidating into one. Harmony is the goal.

  • Financial: A change to a firm's capital structure, such as a debt restructuring designed to allow a firm in financial distress to continue to operate.

未濟 Wei Ji: It is a crisis, and it is also the most challenging time. Success and failure often occur in a moment of change. Revisit company history because the transition of times does not happen overnight.

履 Lu: Harmony as a top priority could prevent unnecessary lawsuits. Depth of reasonableness when dealing with the financial situation. Maintaining people's psychological balance and achieve harmony based on respect for differences.

  • Turnaround: Restructuring the administration, operations, and products of an organization that is performing poorly. Often requires new leadership and a change to strategy and culture.

渙 Huan: The problem may lie in the leadership. Review company direction and consolidating resources for better management.

屯 Chun: Leap of faith. The first step is usually weak and vulnerable. However, it is full of ambition and energies. Seize stability, then expansion. However, do not be hasty.

  • Repositioning: A strategy designed to move a firm or business unit to a new business to an operational model.

否 Fou: Stand still situation. It will challenge one able to overcome. Require creativity and focus on solving the case. One should act calmly and avoid unnecessary sacrifices.

困 Kun: Situation that is trapped or stuck. Face reality and use action to break through the predicament.

  • Cost Restructuring: Cutting restructuring and operational costs in response to a downturn or anticipated downturn in revenue or margins.

節 Jie: Set control and limit; Rules and regulations. Reflect on the individual's performance and conduct. Appropriate restrain may be sufficient.

蒙 Meng: New trends and training; technology.

  • Divestment: selling or closing a business unit that us unprofitable, nonstrategic, or problematic in some ways.

升 Sheng: Consider if the business unit can support opportunities for growth and the pace of growth.

離 Li: Consider the interdependence and interrelationship between companies. Seek an environment that is more conducive to survival and development. Decisive actions and expansive methods are required.

  • Spin-Off: restructuring a business unit to be its own company while retaining some ownership. A spin odd is often done to seek a high valuation for an attractive part of a business.

恆 Heng: Consider factors that contribute to the situation. Look for supporting elements and change the necessary. Perseverance through.

剝 Bo: To prevent the situation from worsening, the problem needs to trace from the roots.

Abide by the rules to satisfy stakeholders. To be able to apply the right solution for the right circumstances can ease worry. Follow the trend and be on defensive mode.

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