Corporate structure optimization group of companies

A Success Story: Corporate structure optimization group of companies

 Context: Rapid growth and the need for structural organization

In a competitive and dynamic business landscape, structuring a company’s rapid growth is crucial to ensuring long-term sustainability. This was the case with a communication consultancy company that, within just four years, evolved from a small startup. With only three employees from inception to a thriving organization generating six million euros in revenue, operating five offices, and employing one hundred people. However, as its commercial presence expanded internationally, the company faced significant challenges in managing its financial and corporate structure. Initially, its economic and financial organization was in an embryonic stage, lacking the necessary frameworks to support continued growth.

Objective: Structuring international growth

With the company’s rapid expansion came the need to bring order to its increasing number of international affiliates and investees. Therefore, the challenge was to design and implement a corporate structure that would enhance financial efficiency. Precisely, to optimize operational management and ensure clarity in the roles and responsibilities of all entities involved.

Strategic actions implemented

To achieve these objectives, we conducted a comprehensive restructuring process. The key actions included:

1. Separating the parent company from the main office operations. The first step was to differentiate the parent company’s strategic and administrative functions from the operational activities of the head office. So, the accomplishment was obtained by transferring a business unit, allowing the headquarters to focus on its core commercial activities. While the parent company took on a governance role.
2. Establishing two second-Level holding companies. To streamline regional operations, two holding companies were created—one for Europe and another for America. Furthermore, this division allowed for better monetary management and administrative control over international subsidiaries.
3. Implementing a fee-based structure for intercompany support. We developed a structured fee system to facilitate technical assistance and management support between the parent company and its subsidiaries. Of course, the system was carefully designed to align with the specific activities of each entity and was formalized through detailed contractual agreements.

Challenges encountered and overcome

The restructuring process was not without obstacles. Some of the major challenges included:

• Initial resistance from partners. Many stakeholders initially displayed a lack of interest or urgency in restructuring the corporate framework. Communicating the long-term benefits of these changes did require careful persuasion.
• Equity participation of managers in subsidiaries. Some managers held shares in various American subsidiaries, complicating the restructuring process. Certainly. a balanced approach was needed to respect existing ownership while implementing a cohesive corporate framework.
• Defining holding activities. One of the key steps was determining which activities should be classified as holding functions. To ensure a legally and financially sound corporate structure.

Key constraints considered

Beyond the challenges, to reach the corporate structure optimization group of companies, we needed to respect several inherent limitations throughout the restructuring process:

• Unfamiliar with the approach. For many company stakeholders, the concept of restructuring was new. Often requiring detailed explanations and a gradual transition plan.
• Concerns and skepticism from managers. Managers were initially uncertain about the impact of the new structure on their day-to-day operations and future roles.
• Multi-currency operations. The company’s international presence meant that significant financial transactions were conducted in different currencies. Adding an extra layer of complexity to the restructuring process.

Tangible results achieved

Despite these challenges, the restructuring process yielded remarkable results, regarding the organization and efficiency of the enterprise group:

• A well-defined corporate structure. We established a tree-like corporate model with clear branch divisions, improving governance and accountability.
• Separation of the head office’s operations from the parent company’s role. We clearly delineated their functions,so both entities could operate more efficiently.
• Formalized and rationalized intercompany relationships. We gave clarity and an adequate structure to the relationships between subsidiaries and the parent company, reducing redundancies and inefficiencies.

Competencies demonstrated throughout the process

The successful execution of this restructuring project highlighted several essential competencies:

• Credibility in presenting the restructuring approach. Establishing trust among stakeholders was crucial to gaining their support for the proposed changes.
• Persuasion and change management. Addressing concerns and gaining buy-in from managers ensured smoother implementation.
• Financial accuracy and fairness in fee structuring. We had a rigorous approach to calculating management fees. Hence, we ensured equitable financial arrangements across all entities.

Conclusion: A stronger, more sustainable future

This success story demonstrates how a strategic and well-executed corporate restructuring can transform a fast-growing company, allowing it to navigate international expansion more effectively. Through meticulous planning, clear communication, and a focus on long-term sustainability, the company successfully established a robust framework that will support its continued success in the global market. This corporate structure optimization group of companies has allowed this holding to twenty years of entrepreneurial achievements.