Corporate Restructuring

EMP 51 Timothy A. Thompson

What is restructuring?

1980s: corporate restructuring identified with leveraged buyouts, LBOs, LCOs

More generally, however, divestitures, carve out IPOs, spin offs, etc.

Early 1990s: corporate restructuring identified with troubled debt restructuring: workouts and reorganization

Impetus for restructuring

Stock market

Activist shareholders Pension funds Global Technological

Increasing competition

Change in regulation

Restructuring hexagon
Information gap

Slightly modified from the McKinsey book.

Operating improvement Incentives management with VBM

Divestiture activity, spin offs

Financial engineering: leverage, dual class stock, carve outs, tracking stock, employee ownership, debt restructuring

Dimensions of restructurings

Asset restructuring

Acquisitions Divestitures Spin offs Corporate downsizing Outsourcing

Dimensions of restructuring, II

Restructuring ownership structure, leverage

Exchange offers Share repurchases LBOs, LCOs

Restructuring equity claims (next slide)

Restructuring equity claims

Inside vs. outside equity ownership

MBOs, LCOs ESOPs, Employee buyouts Active investors, institutional blockholders IPO Spin off, carve out IPO, letter stock

Restructuring equity claims

Dimensions of restructuring, III

Ownership vs. control

Limited partnerships Leasing Joint ventures Securitization Project finance Value based management programs (EVA, etc.)

Incentive restructuring

Dimensions of restructuring, IV

Corporate control

Antitakeover amendments Dual-class recapitalizations Greenmail/Standstill agreements Poison pills/Charter amendments Defensive asset/ownership restructurings

Distress related restructuring

Troubled debt restructuring Workouts Pre-packaged Chapter 11 Chapter 11 reorganizations Liquidations