Investing Megatrends: Restructuring
- Mounting global competition is putting pressure on all companies.
- Companies that restructure are often undervalued in the short term.
- Successful restructuring can create shareholder value over time.
In an increasingly globalized marketplace, companies are constantly facing new competitive threats to their businesses: ambitious rivals emerge to take away market share; nations change how they regulate industries; new markets may open, but firms find themselves unable to capitalize on them. Suddenly the old ways of doing business are no longer efficient or even effective. In today’s world, those pressures are only increasing. It’s a case of adapt to survive.
Instead of just letting their businesses fade away, forward-thinking firms recognize these threats and restructure themselves to strengthen their positions, also potentially benefitting investors. In the short-term, many companies that restructure are misunderstood, their retooling seen as a sign of weakness. But over the long term, the changes those companies make can create stronger businesses that may provide substantial rewards to their shareholders.
Indeed, restructuring can be a fertile source of growth, particularly within the complex structures of developed world economies, where efforts to specialize and increase efficiency may potentially lead to attractive investment opportunities.
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