Corporate restructuring

 Corporate restructuring refers to the changes in ownership, business mix, asset mix &
alliancewith a view to enhance the shareholders value. Hence, corporate restructuring
may involveownership restructuring, business restructuring, asset restructuring for the
purpose of making itmore efficient and more profitable.
 A company can affect ownership restructuring through mergers & acquisitions,
leveraged buyouts, buy back of shares, spin-offs, joint venture & strategic alliance.
 Business restructuring involves the reorganization of business units or divisions. It
includesdiversification into new businesses, out sourcing, divestment, brand acquisitions
etc.
 Asset restructuring involves the acquisition or sale of asset & their ownership structure.
E.g.Sale & lease back of assets, securitization of debts, receivable factoring, etc.

Purpose of Corporate Restructuring

 The basic purpose is to enhance the share holder value.

 The company should continuously evaluate its portfolio of businesses, capital mix &
ownership & assets arrangements to find opportunities to increase the share holders’
value.
 It should focus on asset utilization & profitable investment opportunities, & reorganize
ordivest less profitable or loss making businesses/products.
 The company can also enhance value through capital restructuring; it can innovate
securitiesthat help to reduce cost of capital.

Significance

 Limit competition
 Utilize under-utilised market power
 Overcome the problem of slow growth and profitability in one’s own industry
 Achieve diversification
 Gain economies of scale and increase income with proportionately less investment
 Establish a transnational bridgehead without excessive start-up costs to gain access to
aforeign market
 Utilize under-utilised resources- human and physical and managerial skills
 Displace existing management
 Circumvent government regulations
 Forms of restructuring
Forms of Corporate Restructuring
Different Methods of Corporate Restructuring

EXPANSION TECHNIQUES

 MergersTakeovers
 Tender offer
 Asset acquisition
 Joint venture
 Strategic alliance
 Holding companies
 Takeover by reverse bid

DIVESTMENTTECHNIQUES

 Sell off
 Spin off
 Management Buy Out
 Leveraged Buy Out
 Liquidation

OTHER TECHNIQUES

 Going Private
 Share Repurchase
 Management Buy In
 Reverse merger
 Equity carve out