CORPORATE RESTRUCTURING PRESENTED BY:- SHWETA SINGH SUSHMITA SINGH SANDEEP DEVNATH SECTION B
CORPORATERESTRUCTURIN
G
PRESENTED BY:-SHWETA SINGHSUSHMITA SINGHSANDEEP DEVNATHSECTION B
Corporate Restructuring?
•The process involved in changing the organization of a business. Corporate restructuring can involve making dramatic changes to a business by cutting out or merging departments that often has the effect of displacing staff members.
Types of Restructuring
•Expansion: Mergers, Acquisitions, Takeovers, Joint Ventures.
•Contraction: Sell Offs, Spin Offs, Split Offs, Split Ups.•Changes in ownership: Leveraged Buyout, Going
Private.
Merger or Amalgamation•A merger refers to the process whereby at least two
company combine to form one single company.• It is a financial tool used for enhancing long term
profitability by expanding their operations.• It is done in order to increase efficiency and
sometimes to avoid competition.
•Merger or amalgamation may take two forms:
Absorption: It is a combination of two or more companies into an existing company.
Consolidation: It is a combination of two or more companies into a new company.
Reasons for Merger•Gaining a competitive advantage or larger market
share.•Diversifying products and services.•Cutting costs.•Managerial Effectiveness.•Tax Benefits.
Forms of Merger•Horizontal Merger: It is a business consolidation that
occurs between firms who operate in the same space, often as competitors offering the same good or service.
•Vertical Merger: It is a merger between two companies producing different goods or services for one specific finished product.
•Conglomerate Merger: It is a type of merger whereby the two companies that merge with each other are involved in different sorts of businesses.
•Concentric Merger: It is a type of merger where the two companies coming together share some common expertise that may possess mutually advantageous.
Acquisition• It is a corporate action in which a company buys
most, if not all, of the target company's ownership stakes in order to assume control of the target firm.
•A substantial acquisition occurs when an acquiring firm acquires substantial quantity of shares or voting rights of the target company.
Takeover
•A takeover is the purchase of one company by another.
• If the takeover goes through, the acquiring company becomes responsible for all of the target company's operations, holdings and debt.
Joint Venture
• It is a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.
• It takes place when two parties come together to take on one project.
Strategic Alliance
•A strategic alliance is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. This form of cooperation lies between mergers and acquisitions and organic growth.
Sell off•When a company sells a part of its business to a third
party, it is called sell-off.
• It is a usual practice of a large number of companies to sell off to unprofitable or less profitable businesses to avoid further drain on its resources.
Spin Off• It is the creation of an independent company through
the sale or distribution of new shares of an existing business or division of a parent company.
•Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
•After the spin off, shareholders hold shares in two different companies.
Divestiture• It is the partial or full disposal of a business unit
through sale, exchange, closure or bankruptcy.
•Divestiture may result from a management decision to no longer operate a business unit because it is not part of a core competency.
Leveraged Buyout•A leveraged buyout (LBO) is an acquisition of a
company or a segment of a company funded mostly with debt.
•The basic idea behind an LBO is that the acquirer purchases the target with a loan collateralized by the target's own assets.
•High growth, high market share firms and high debt capacity firms are generally the targets for LBOs.
Demerger•A demerger is a form of corporate restructuring in
which the entity's business operations are segregated into one or more components.
• It is the converse of a merger or acquisition.•A demerger is often done to help each of
the segments operate more smoothly, as they can now focus on a more specific task.