The Use of Book Value per Share The Value of Money

The Value Behind Corporate Restructurings

by
Corporate restructurings, such as the shutting or selling of a major division, are often done to cut losses, reduce debt, or refocus. These can present opportunities for sophisticated investors. The underperforming part of the business may have been hiding how good the rest of the business was. If the company sheds the unprofitable part of the business, earnings will immediately increase, and the longer-term benefit is that the company will be able to refocus on its core business. Many companies don't do restructurings unless they absolutely have to, so when you see a restructuring in a situation that wasn't dire, it's probably a sign that the management cares about increasing shareholder value.