Global Restructuring

Why Companies Restructure

Restructuring is no longer merely a measure of last resort—it has evolved into a strategic instrument for ensuring business continuity, driving growth, and unlocking long-term value. Companies around the world undertake restructuring initiatives for a wide range of reasons, often triggered by a complex interplay of internal dynamics and external pressures.

At L&E Global, our member firms support international organizations in navigating these transitions with clarity, precision, and foresight. Below is an overview of the most common factors that influence a company’s decision to initiate a restructuring process.

Internal Factors Driving Restructuring

Companies often look inward when determining the need to restructure. Internal factors typically relate to performance issues, strategy shifts, or operational inefficiencies that hinder competitiveness or profitability. Below you will find the 5 most common factors that drive restructuring from within.

1. Financial underperformance
Declining revenues, shrinking margins, or unsustainable debt levels often signal the need for structural change. Financial distress can result from outdated business models, inefficient cost structures, or poor return on capital. A financial restructuring may involve re-negotiating debt, optimizing the capital structure, or reallocating resources to profitable units.

2. Operational inefficiencies
Inefficient processes, duplicated functions across jurisdictions, or outdated systems can limit agility and performance. Operational restructuring aims to improve productivity through centralization, automation, shared service models, or divestiture of underperforming business lines.

3. Leadership changes or strategic shifts
New management or a revised strategic direction—such as moving from a regional to a global focus—often necessitates a reorganization of business units, reporting lines, and governance structures. Strategic realignment is a common trigger for corporate restructuring, especially in multinational companies seeking consistency across borders.

4. Business model transformation
Companies must evolve with technological advancements and changing customer expectations. Transitioning from traditional to digital platforms, adapting to subscription-based revenue models, or integrating ESG (Environmental, Social, Governance) goals may all require fundamental structural shifts.

5. Integration following M&A
Post-merger integration is one of the most complex forms of restructuring. Combining legal entities, harmonizing employment contracts, unifying IT systems, and aligning corporate cultures requires a deliberate and legally sound restructuring strategy to realize the intended synergies.

External Factors Prompting Restructuring

While internal issues often trigger restructuring, companies must also respond to forces beyond their control. These external factors can disrupt operations, challenge compliance, and shift market dynamics—prompting proactive or defensive restructuring. Below you will find the 5 most common factors that drive restructuring from the outside.

1. Economic downturns and market volatility
Global economic crises, inflationary pressures, or supply chain disruptions often force businesses to rethink cost structures and liquidity strategies. Companies may need to downsize, divest assets, or renegotiate contracts to maintain viability.

2. Regulatory and legal developments
Changes in international tax laws, labor regulations, competition rules, or insolvency frameworks can significantly impact how companies operate across jurisdictions. Compliance-driven restructuring ensures alignment with new obligations while minimizing legal risks.

3. Geopolitical risks and trade barriers
Trade wars, sanctions, and geopolitical instability can render existing market strategies unworkable. Companies with global footprints may need to exit certain markets, reconfigure supply chains, or establish new legal entities to mitigate jurisdiction-specific exposure.

4. Technological disruption
Emerging technologies—AI, automation, blockchain—can rapidly disrupt industry norms. Companies unable to adapt may find their business model obsolete. A technology-driven restructuring strategy may include the formation of innovation hubs, tech partnerships, or a shift in talent strategy.

5. Environmental and social pressures
Sustainability and stakeholder accountability are no longer optional. Restructuring may be required to meet ESG standards, reduce environmental impact, or address shareholder activism. These transformations often intersect with legal restructuring, especially in regulated industries.

Key Areas of Focus in International Restructuring

Restructuring an international company requires more than a tactical fix; it demands a strategic realignment of the organization’s financial, operational, legal, and human infrastructure. Especially in cross-border settings, a successful restructuring process must address a range of complex, interdependent issues. Each element plays a pivotal role in determining whether the company emerges stronger, leaner, and legally secure—or faces continued instability. The following key areas form the backbone of most international restructuring projects.

Financial Restructuring: Restoring Stability and Liquidity

Financial restructuring is often the starting point of any corporate turnaround. Companies may face unsustainable debt, constrained cash flow, or misaligned capital structures that no longer support long-term growth. Addressing these challenges involves reviewing existing financing arrangements and considering tools such as refinancing, covenant renegotiation, debt rescheduling, or—in more severe cases—debt-for-equity swaps or formal insolvency proceedings.

In international contexts, financial restructuring must also account for the legal frameworks applicable in each jurisdiction. For example, using court-supervised proceedings such as Chapter 11 in the United States, the WHOA in the Netherlands, or preventive restructuring mechanisms under EU law may be essential to bind creditors or secure temporary protection from enforcement actions. Careful legal guidance ensures that financial solutions are both commercially viable and legally enforceable across borders.

Operational Restructuring: Streamlining Business Functions

Beyond the financial dimension, many restructurings require a fundamental rethinking of how a company operates. Operational inefficiencies—whether due to redundant structures, outdated processes, or geographic fragmentation—can undermine profitability and strategic execution. In response, companies may choose to consolidate legal entities, optimize supply chains, automate core functions, or divest non-core business units.

Multinational companies must approach these steps with sensitivity to local regulations and practical realities. Closing operations in one country may trigger employee consultations, social plans, or regulatory filings. Relocating shared services or production facilities may raise contractual, tax, or compliance implications. Effective operational restructuring balances commercial imperatives with legal obligations and cultural considerations in each relevant market.

Legal and Regulatory Compliance: Navigating a Multi-Jurisdictional Landscape

Any international restructuring effort must be grounded in legal certainty. Companies must ensure that each phase of the process aligns with applicable corporate, labor, insolvency, and regulatory laws. This includes ensuring proper authorization for corporate reorganizations, adhering to statutory timelines, and respecting creditor rights under local and international legal instruments.

For cross-border operations, restructuring must also consider the interaction between national legal systems. The recognition of insolvency proceedings, application of international conventions, and compatibility with EU or local directives all come into play. Companies operating across multiple jurisdictions must anticipate legal friction points and engage early with local counsel to map out a compliant, coherent legal strategy.

Human Capital and Employment Matters: Managing People Through Change

Restructuring has profound consequences for the workforce. From changes in management structure and workforce reductions to transfers of undertakings, the human dimension of restructuring requires careful planning and execution. Companies must comply with national labor laws, collective bargaining obligations, and consultation requirements—especially in jurisdictions with strong employee protection frameworks.

Beyond legal compliance, companies must also manage communication, morale, and retention. Successful restructuring strategies often include retention plans for key personnel, well-managed consultation processes with works councils or unions, and clear messaging to reassure employees and other stakeholders. Addressing the human element proactively is essential to preserving productivity and corporate reputation during periods of transition.

Tax Considerations: Safeguarding Efficiency and Compliance

Tax implications are a critical, and sometimes underestimated, aspect of international restructuring. Any change in legal structure, financing arrangements, or geographic presence can trigger significant tax consequences. These may include corporate income tax liabilities, withholding tax exposures, transfer pricing adjustments, and indirect tax issues such as VAT or customs duties.

A thorough tax assessment should be integrated into the restructuring plan from the outset. By identifying and addressing potential exposures early, companies can avoid costly surprises and ensure that the restructured business is not only operationally sound, but also fiscally efficient and compliant across all affected jurisdictions.

Navigating Global Restructuring with L&E

Restructuring a company, especially across borders, is a complex process that demands more than legal knowledge alone. At L&E Global, our member firms take a multidisciplinary approach, combining legal, financial, and strategic insight to guide clients through every stage of restructuring.

Our teams are recognised in leading legal directories and have a strong track record in managing successful restructurings in diverse industries and jurisdictions. Whether your company is responding to financial stress or preparing for future growth, we offer tailored, practical solutions grounded in deep local expertise.

If you are considering a restructuring process or would like to understand your options, we invite you to contact our team for a confidential consultation.