STRATAGIC MANAGEMENT

CORPORATE RESTUCTURING
STRATEGIES

M
Corporate Restructuring

The process of redesigning one or more aspects of a company.

Strategies for corporate restructuring

 Mergers and Acquisition
 Internal new ventures
 Takeover
 Joint Ventures
Mergers

It’s a combination of two or more companies into a single company where one
survives and other lose their corporate existence.

Types of Mergers:
• Vertical Combination
• Horizontal Combination
• Conglomerate Merger
• Concentric Merger
Vertical Combination
A process of joining of two or more companies involved in different
stages of production or distribution of the same product or service.
Two Types:

Petroleum Exploration
Backward integration

Petroleum Refinery
Forward integration

Sale to wholesalers/ retailers

Horizontal Combination
This involves two or more firms operating and competing in the same
kind of business activity.

Conglomerate Merger
It involves firms engaged in unrelated types of business activity or
whose businesses are not related either vertically or horizontally.

Concentric merger
It’s a combination of firms related to each other in terms of customer
groups or customer functions or alternative technologies.
 Acquisition

An acquisition is a strategy through which one firm buys a

controlling, or 100 percent interest in another firm with the
intent of using a core competence more effectively by making
the acquired firm a subsidiary business within its portfolio.
 Reasons for Acquisition

 Increased Market Power

 Overcoming the entry barriers

 Cost of new product development

 Increased speed to market

 Increased diversification

 Avoid Excessive competition

Problems in achieving the acquisition success

 Integration difficulties
 Inadequate Evaluation of target
 Large or Extraordinary Debt
 Inability to achieve synergy
 Too much diversification
 Too much large
LEVERAGE BUYOUT
Meaning

A leveraged buyout, or LBO, is the acquisition of a

company or division of a company with a substantial
portion of borrowed funds.

History of the LBO

First early leveraged buyouts were carried out in the years

following World War II

Previously known as a “bootstrap” acquisition.

Freedom from the scrutiny of being a
public company or a captive division of a
larger parent,

The ability for founders to take advantage

of a liquidity event without ceding
operational influence or sacrificing
continued day-to-day involvement, and

Characteristics of Leverage buyout

Characteristics
The opportunityof Leverage buyout
for managers to become
owners of a significant percentage of a
firm’s equity.

Tax advantages associated with debt

financing,
Management Buyout LBO

Employee Buyout LBO

Whole-Firm Buyout LBO

Three Forms of LBOs

 Downscoping
It is not downsizing--closing offices and
laying off
personnel.

It is:
Divestiture, spin-off,
focusing on core skills,
diversifying internationally while focusing
on businesses in which a firm has strong
competencies.
Factors Effecting Downscoping

The magnitude and character of the refocusing action

itself,

The position the firm was in before deciding to

refocus,

Any other refocusing that takes place within the firm

after refocusing,
 
The industry the refocuser is returning to, and the
refocuser's basic corporate strategy
Eg. Walt Disney
Conclusion
Thank You