Key Takeaways
- Companies facing complex operating structures, duplicative resources or rapid growth should assess if restructuring can enhance efficiency, reduce costs and drive strategic alignment.
- Restructuring decisions demand cross-functional analysis — typically including valuation, tax structuring, cost allocation and regulatory compliance — to ensure data-driven, risk-aware outcomes.
- Boards and executives need clear, independent, board-ready insights supported by financial modeling, tax due diligence and compliance assessments to evaluate restructuring opportunities objectively.
For boards and CEOs, few decisions carry more long-term impact than whether to restructure your company. That could include acquiring, divesting or consolidating divisions or shifting the existing organizational structure. While restructuring is often viewed as a pathway to greater efficiency, cost savings and growth, determining whether restructuring will actually create value requires careful, objective analysis.
Business Characteristics for Considering Restructuring
If your company has any of the following characteristics, restructuring could be the right next step for you:
- Fast-changing and dynamic industry landscape and competitive environment.
- Rapid growth (through either organic expansion or acquisition) or a business downturn.
- Missed market or cross-selling opportunities.
- Complex operating structure with multiple or excessive operating divisions where management and operations have become unwieldy, inefficient, outdated or outmoded.
- Overlapping markets across divisions.
- Complementary capabilities.
- Shared cost structures (but managed separately).
- Duplicative or overlapping resources.
The decision about whether to restructure is rarely straightforward and entails a thorough analysis of financial valuation, tax implications, cost allocation, legal and regulatory considerations, management oversight and operational alignment. With any restructuring plan or program, it’s important to gain clarity about both the opportunities and risks. Without a disciplined, cross-functional approach — and clear communication of the results — leaders risk making restructuring decisions based on assumptions rather than insight.
Analysis Required for Critical Information and Insight
A number of separate factors must be considered before a reorganization or consolidation decision (and plan) can be made, with certain assessments critical to yield the necessary information and insight. Also important is having the professional expertise in each area to drive the analysis and interpret and communicate the results:
Analysis | Information and Insight |
Financial Valuation | Standalone value of each division versus the consolidated entity:
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Tax Implications | How different structuring options would affect the company’s tax position:
|
Cost Savings and Profitability | Cost savings generated by restructuring and/or consolidating divisions:
|
Regulatory Compliance | Impact under applicable industry and other relevant regulations |
Cost Allocation | Optimization of shared services:
|
Approach Matters: Client Success Story
It’s one thing to know what should be assessed to make an informed go/no-go decision. But it takes a highly-specialized and trusted team of talent to adequately conduct the analysis, then interpret and communicate the results. Most often, this diverse skill set does not already exist in-house for most organizations. This is why PKF O’Connor Davies is often engaged.
In this case study, our client is a multibillion-dollar company with a variety of offerings across multiple operating divisions. The organization’s question was whether to combine (consolidate) two major divisions — or not — and they relied on our expertise to guide them to their strategic decision.
We began our engagement with an Immersion and Fact-Finding phase designed to analyze each division’s financial statements and corporate structure, including operating-cost policies and procedures. We conducted targeted interviews with division leadership, finance and accounting teams and operational managers to understand business models, revenue streams and cost structures. Drawing on our team’s diverse yet extensive M&A advisory, transaction structuring, tax and accounting experience, we then evaluated each division’s business, profitability, operations, cost structure and market positioning, providing the following:
- Valuation Analysis: Combined Discounted Cash Flow (DCF), comparable company analysis and precedent transactions to develop valuation models to reflect standalone divisional value versus pro forma value creation through cost synergies, revenue enhancements, capital optimization and potential tax benefits.
- Incorporated sensitivity analyses for various market and operational scenarios and stress-tested financial models to ensure resilience under different economic conditions.
- Tax Due Diligence: Evaluated various structuring alternatives, including asset transfers, stock swaps, internal legal-entity restructurings and holding company reorganizations with the goal of ensuring a tax-free transaction, leveraging available net operating losses and preserving tax-efficient financing structures.
- The tax analysis was integrated into the valuation models, enabling the board to analyze the net, after-tax impact of each strategic option.
- Cost Allocation Framework: Balanced fairness, transparency and strategic alignment to ensure the new organization would streamline operations, reduce costs, increase profitability, support accountability and enable equitable treatment of all stakeholders. The team:
- Conducted a bottom-up analysis of shared-service costs (IT, HR, facilities, compliance, marketing).
- Designed cost-allocation codes based on headcount, assets deployed, utilization metrics including fees and revenue contribution.
- Modeled the effect on divisional profit and loss (P&L) statements, post-consolidation.
- Regulatory Assessment: Analyzed the potential regulatory impact of consolidation:
- Assessed implications under applicable federal and state regulations.
- Mapped out compliance workflow modifications for the consolidated operations.
- Consulted with company executives and outside regulatory counsel to analyze draft regulatory filings, minimize delays and position the client to obtain regulatory approval to consummate the combination (consolidation).
- Board-Level Communication: To provide strategic clarity and actionable insight for sound decision making, we distilled our complex analyses into a cohesive consulting report with a ‘conclusion of value’ and decision-oriented briefing materials, including:
- Comprehensive Consulting Report: Presenting findings and conclusions, including valuation, tax analysis, cost allocation analysis and regulatory considerations.
- Executive Summaries: Highlighting the financial, operational and risk considerations.
- Scenario Comparisons: Showing side-by-side impacts of different structuring choices.
- Strategic Recommendations: Including recommendations about improving internal controls and operating processes, supported by both data and qualitative assessments.
Outcomes and Impact: This case exemplifies the value PKF O’Connor Davies brings to boards of directors and c-suite executives facing complex strategic decisions. This client credited our team for providing the strategic and creative insight to enable their faster, more informed decision. We delivered:
- Clear Strategic Direction: The board approved the consolidation, confident in the quantified and qualitative benefits and associated risks and benefits.
- Valuation-Driven Decision: The post-consolidation organization structure is expected to significantly increase enterprise value and create a better customer experience.
- Tax Optimization: Structuring choices were designed to unlock certain tax benefits.
- Cost Synergies: Identified and validated significant annual cost savings from combining operations, optimizing shared services and tax benefits.
- Regulatory Compliance: In collaboration with the company’s senior executives and regulatory compliance team, PKF crafted materials designed to streamline the regulatory approval process.
These outcomes demonstrate how disciplined analysis and clear communication can bring clarity to even the most complex restructuring decisions.
We Can Help
Board and executive-level strategic decisions often hinge on the quality of information and analysis and the clarity of recommendations provided by independent, trusted advisors. Our team’s combination of technical mastery, strategic M&A, tax and structuring experience and know-how — along with board-oriented communication skills — empowered this client’s leadership to make a transformative decision with confidence. We can help boards, CEOs, CFOs and executive teams apply this same disciplined approach to their restructuring, acquisition, divestiture and consolidation decisions.
Contact Us
To discuss our board advisory or transaction advisory services or learn more about this topic, please contact your PKF O’Connor Davies client service team or:
Eric Gelb, CPA
Partner
egelb@pkfod.com | 914.341.7049
Christopher Migliaccio, JD
Partner
cmigliaccio@pkfod.com | 646.699.2890
Noam Hirschberger, CFA, CVA
Partner
nhirschberger@pkfod.com | 646.449.6363
Elisabeth da Silva, CPA, CFF
Partner
edasilva@pkfod.com | 781.937.5792