Bratin Biswas 1 An Introduction to Business Restructuring
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Bratin Biswas 1
An Introduction to Business Restructuring
Bratin Biswas 2
Business Restructuring
Contents
Topic Slide
1 Introduction – What is Business Restructuring
2 Business Restructuring
• Downsizing
• Downscoping
• Leverage Buyout
3 Case Study – Northwest Airlines
Bratin Biswas 3
Introduction – What is Business Restructuring
“A Strategy through which a firm changes its set of business or financial structure"
Session Objectives Restructuring is the corporate management term for the act of partially dismantling or otherwise reorganizing a company for the purpose of making it more efficient and therefore more profitable...
Purpose
>> To unlock value in the businesses
>> To comply with Regulatory requirements
>> To hive off non-core businesses
>> To streamline operations of the Group in similar activities
>> Family Settlement / Re-arrangement
Restructuring options
>> Merger
>> Slump Sale / Sale of business
>> Creation of subsidiary
>> De-merger
>> Individual Assets Sale
• Downsizing • Downscoping • Leveraged buyouts
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• A strategy through which a firm changes its set of businesses or financial structure
▪ Failure of an acquisition strategy often precedes a restructuring strategy
▪ Restructuring may occur because of changes in the external or internal environments
• Restructuring strategies:
▪ Downsizing
▪ Downscoping
▪ Leveraged buyouts
What is Business Restructuring?
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• A reduction in the number of a firm’s employees and sometimes in the number of its operating units
▪ May or may not change the composition of businesses in the company’s portfolio
• Typical reasons for downsizing:
▪ Expectation of improved profitability from cost reductions
▪ Desire or necessity for more efficient operations
Types of Restructuring : Downsizing
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• A divestiture, spin-off or other means of eliminating businesses unrelated to a firm’s core businesses
• A set of actions that causes a firm to strategically refocus on its core businesses
▪ May be accompanied by downsizing, but not eliminating key employees from its primary businesses
▪ Firm can be more effectively managed by the top management team
Types of Restructuring : Downscoping
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• A restructuring strategy whereby a party buys all of a firm’s assets in order to take the firm private
▪ Significant amounts of debt are usually incurred to finance the buyout
• Can correct for managerial mistakes
▪ Managers making decisions that serve their own interests rather than those of shareholders
• Can facilitate entrepreneurial efforts and strategic growth
Restructuring : Leveraged Buyouts
Bratin Biswas 8 Source: Dr. Tom Lachowicz, Radford University
Restructuring & Outcomes
Bratin Biswas 9
Case Study – Northwest Airlines
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About Northwest Airlines
Source: https://en.wikipedia.org/wiki/Northwest_Airlines
• Northwest Airlines Corp. (often abbreviated as NWA) was a major United States airline founded in 1926
• On January 12, 2007, NWA Corp. and 13 of its direct and indirect subsidiaries, including Northwest, filed with the Bankruptcy Court the Debtors' Joint and Consolidated Plan of Reorganization Under Chapter 11 of the Bankruptcy Code
• Delta Air Lines, Inc. acquired Northwest in a $3.1B deal in 2008
• Northwest continued to operate under its own name and brand until the integration of the carriers was completed on January 31, 2010
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Northwest Airlines – 2007 Restructuring Plan
Source: NWA Equity Roadshow Document, SEC
Bratin Biswas 12
Northwest Airlines – 2007 Restructuring Plan (Contd.)
Source: NWA Equity Roadshow Document, SEC
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