Focus: Operational and performance improvements.
Methods:
Increasing revenues and reducing costs to improve cash flow.
Improving a company’s financial position through better management and operational efficiency.
Analogy: Think of it as tending to a plant with light pruning, better soil, and watering to help it stabilize and flourish.
Focus: Capital structure, debt, and ownership changes.
Methods:
Formal insolvency proceedings when a company is in severe financial distress.
Direct intervention in the company’s debt and equity structure.
Reorganizing legal, ownership, or operational structures to improve profitability.
Analogy: This is like a hard prune on a plant, getting rid of the dead or diseased parts to save the rest of the plant.
Turnaround and restructuring often work hand-in-hand to save a company facing financial difficulty.
A turnaround can be seen as a prerequisite to a successful restructuring, as operational improvements often need to happen first to make the company a viable candidate for restructuring.
Both processes are used to avoid bankruptcy and ensure a company can continue to operate as a going concern.
