401 – CORPORATE MANAGEMENT

UNIT – 1

What is Professional Management?

Professional Management refers to the systematic approach in administering of
the organization .In every organization from the top level management to the
lower level management Packed full of professional people. Managers must
have professional, qualification and technical skills with good amount of
experiences that will help the organization to make more professional.

Professional Management in India

India is one of the fastest growing economy in worlds. That is why many multi
national companies coming to India to investment. So, the professionalism is
increasing day by day in India. The traditional approach is becoming old and
people are adopting latest method of management which is helping them to
increasing their business growth.
The companies is adopting new method of management and they are giving
training to their employees in order to achieve long term long of the
organization.

Following are the important characteristics of professional management:

1. Formal Education: - professional managers are formally educated and trained

to run the business organisation. They place great emphasis on training and
development of managers. Most of the professional managers have either
degree or diploma in management.

2. Merit the basis of promotion: - professionally managed companies follow

merit as the basis of promotion at higher levels. Family neither ties, nor biased
as the basis of promotions is normally not followed in such organisations.

3. Delegation of authority: - The senior managers delegate authority to the

subordinate managers. Routine and repetitive activities are given in the charge
of subordinates. Only important and crucial matters are decided by the
superiors.
4. Social responsibility: - professional managers give the due consideration to
the concept of social responsibility. In fact, they try to bring reconciliation or a
balance between profit motive and social responsibility. They go for consumer
oriented products. They try to improve the quality through research and
development, and so on.

5. Employees Participation: - The top management not only secures the active
participation of subordinate managers in planning and controlling activities, but
they also encourage initiative and innovative ideas from the employees.
Valuable suggestions are implemented and those who provide ideas are often
rewarded.

6. Automation and Modernisation: - professional managers advocate the need

for automation and modernisation. They recognise the change brought in by
changing situations, and are ready to accept that change. They also encourage
their subordinates to willingly accept the automation and modernisation plans of
the organisation.

7. Decentralisation: - professional management believes in balance between

centralisation and decentralisation. Important matters are centralised, and other
matters are decentralised. The top management believes that involvement of
lower level managers is vital to the success of the organisation.

8. Style of leadership: - professional managers follow the situational style in

managing their business activities. They are more of democrats rather than
autocrats.

Nature /Characteristics / Features of Professional Mangement

1. Decision-Making Ability

In professional management, the managers have the ability to think, analyze

situations and take rational decisions regarding business activities. Their
decisions are generally very sound keeping in the prospective growth of
business in their mind.

2. Capacity to Accept Challenges

In professional management, managers have the capacity to accept new
challenges due to their educational and training background.

3. Use of New Techniques

In Professional management, managers use new techniques such as computers,

automation and information technology for solving managerial problems.

4. Enhancement of Knowledge & Skill

In professional management, managers keep their knowledge and skill up to

date by attending management development programmes. They attend
conferences, seminars and workshops and enhance their knowledge and skill by
exchanging their ideas with other professionals.

5. Merit as the Basis of Promotion

In professional management, the traditional and conservative types of

management promotions to the higher posts are given based on seniority. This
does not give scope for youngsters having talents who are very useful for the
growth of business. Professionally managed companies give promotion to
higher posts assuming merit or performance in the work.

Role of Professional Management

Innovation: -Professional management facilitates innovation in the
organisation. Now-a-days, it is essential to generate new ideas; new product,
and new technology, etc. innovation helps to gain competitive advantage in
today’s competitive business world.

Corporate Image: - Professional management enables the organisation to

enhance corporate image. Effective management is required to bring
improvement in quality of goods and services offered by the company. A good
corporate image creates confidence about the company in the minds of
customer, employees, shareholders, etc.

Team work: - Professional management develops team sprit in the

organisation. It is the team work that brings success to the organisation. There is
a need for team work among the employees and the departments in the
organisation.

Optimum use of resources: - Professional management facilitates optimum

use of resources in the organisation. Effective management helps to reduce
wastage of resources to a greater extent. Optimum use of resources brings good
results to the organisation.
Higher Efficiency: - Professional management is required to generate higher
efficiency in the organisation. Efficiency is the relation between returns and
costs. The more the returns at the same costs or at a lower cost, then the
organisation is said to be more efficient.

What Is Managerial Remuneration?

Managerial remuneration is compensation for services provided to a company in
a managerial capacity. This can include cash payments, along with benefits like
stock options, health insurance, and bonuses. Managers are typically paid more
than the people they supervise, although they tend to make less than the
executives at the head of the company. Some pay structures are transparent,
making it easy to determine how much money managers make, while others
may be confidential.

What Is a Financial Institution (FI)?

A financial institution (FI) is a company engaged in the business of dealing with
financial and monetary transactions such as deposits, loans, investments, and
currency exchange. Financial institutions encompass a broad range of business
operations within the financial services sector including banks, trust companies,
insurance companies, brokerage firms, and investment dealers.
Virtually everyone living in a developed economy has an ongoing or at least
periodic need for the services of financial institutions.

 Role of financial institution

#1 – Regulation of Monetary Supply
Financial institutions like the Central Bank help regulate the money supply in
the economy to maintain stability and control inflation. For example, the
Central Bank applies various measures like increasing or decreasing repo
rate, cash reserve ratio, and open market operations, i.e., buying and selling
government securities, to regulate liquidity in the economy.
#2 – Banking Services
Financial institutions, like commercial banks, help their customers by
providing savings and deposit services. In addition, they offer credit
facilities like overdraft facilities to the customers for catering to the need for
short-term funds. Commercial banks also extend several loans like personal
loans, education loans, mortgages, or home loans to their customers.
#3 – Insurance Services
Financial institutions, like insurance companies, help to mobilize savings and
investment in productive activities. In return, they assure investors against their
life or some particular asset at the time of need. In other words, they transfer
their customer’s risk of loss to themselves.
#4 – Capital Formation
Financial institutions help in capital formation, i.e., increase in capital
stock like the plant, machinery, tools and equipment, buildings, transport,
communication, etc. Moreover, they mobilize the idle savings from individuals
in the economy to the investor through various monetary services.
#5 – Investment Advice
There are many investment options available at the disposal of individuals and
businesses. But in the current swift changing environment, it is not easy to
choose the best option. Almost all financial institutions (banking or non-
banking) have an investment advisory desk that helps customers, investors, and
businesses to select the best investment option available in the market according
to their risk appetite and other factors.

UNIT – 2

What is Corporate Restructuring?

Corporate restructuring is also referred to as business restructuring. Business
restructuring is a process in which an entity changes its legal structure to ensure
the seamless running of the business. This process is usually carried out when
the business is facing financial or economic problems. When a company is
unable to pay a corporate debt, it enters into a restructuring agreement with its
lenders. In this agreement, the company's strategy to pay the corporate debt
would be mentioned. Creditors and Lenders are an essential part of the
corporate restructuring process.
A company's inability to not pay a corporate debt is not the only reason for
corporate restructuring. Other reasons can be a company entering into an
acquisition agreement, or a joint venture or M & A process.
Corporate restructuring is the process of redesigning one or more aspects of a
company. The process of reorganizing a company may be implemented due to a
number of different factors, such as positioning the company to be more
competitive, survive a currently adverse economic climate, or poise the
corporation to move in an entirely new direction

Types of Corporate Restructuring

1. Money related Restructuring:
This kind of rebuilding may happen because of a serious fall in the general
deals in the light of unfavourable financial conditions. Here, the corporate
substance may modify its value design, obligation adjusting plan, the value
property, and cross-holding design. This is done to support the market and for
the benefit of the organization.
2. Hierarchical Restructuring:
Organizational Restructuring suggests an adjustment in the authoritative
structure of an organization, for example, decreasing its degree of the chain of
importance, updating the activity positions, scaling down the representatives,
and changing the detailing connections.

Characteristics of Corporate Restructuring  

1. To improve the company’s Balance sheet, (by selling unprofitable
division from its core business).
2. To accomplish staff reduction ( by selling/closing of unprofitable
portion).
3. Changes in corporate management.
4. Sale of underutilized assets, such as patents/brands.
 5. Outsourcing of operations such as payroll and technical support to a more
efficient 3rd party.
6. Moving of operations such as manufacturing to lower-cost locations.
7. Reorganization of functions such as sales, marketing, & distribution.
8. Renegotiation of labor contracts to reduce overhead.
9. Refinancing of corporate debt to reduce interest payments.
10.A major public relations campaign to reposition the company with
consumers.
What is Mergers & Acquisitions?
Mergers and acquisitions (M&A) are defined as consolidation of
companies. Differentiating the two terms, Mergers is the combination of
two companies to form one, while Acquisitions is one company taken over
by the other. M&A is one of the major aspects of corporate finance world.
The reasoning behind M&A generally given is that two separate companies
together create more value compared to being on an individual stand. With
the objective of wealth maximization, companies keep evaluating different
opportunities through the route of merger or acquisition.
4 Main Types of Mergers and Acquisitions
1. Horizontal
Horizontal mergers and acquisitions happen when companies with similar
products or services come together with the main goal to expand their offerings
or markets.
2. Vertical
Vertical mergers and acquisitions happen when companies in the same industry
but different roles in the supply chain join their forces.
Two companies integrate vertically to improve logistics, consolidate staff or
reduce the time to market their products or services.
A good example of a vertical merger or acquisition is when a clothing retailer
buys a clothing manufacturing company.
3. Conglomerate
Conglomerate mergers and acquisitions happen when companies in different
industries join their forces. The main reason why companies come together this
way is to broaden their range of services and products, reduce expenses or
reduce risks by operating in a wider range of industries.
4. Concentric
Concentric mergers and acquisitions happen when two companies share
customer bases but provide different services.
Most commonly, the two firms operate in the same industry but do not have a
mutual relationship such as a buyer-seller relationship.

Importance of Corporate Restructuring

1. Economies of Scope
Mergers and acquisitions bring economies of scope that aren’t always possible
through organic growth. One only has to look at Facebook to see that this is the
case.Despite providing users with the ability to share photos and contact friends
within its platform, it still acquired Instagram and Whatsapp.Economies of
scope thus allow companies to tap into the demand of a much larger client base.
2. Opportunistic Value Generation
Some of the best deals happen when a company isn't even actively pursuing an
acquisition.The hallmark of these acquisitions is that the purchase price is less
than the fair market value of the target company’s net assets.Often these
companies will be in some financial distress, but a deal can be made to keep the
company afloat while the buyer benefits from adding immediate value as a
direct consequence of the transaction.
3. Increased Market Share
One of the more common motives for undertaking M&A is increased market
share.Historically, retail banks have looked at geographical footprint as being
key to achieving market share and as a result, there has always been a high level
of industry consolidation in retail banking (most countries have a group of “Big
Four” retail banks.A good example is provided by the Spanish retail bank
Santander, which has made the acquisition of smaller banks an active policy,
allowing it to become one of the largest retail banks in the world.
4. Higher Levels of Competition
The larger the company, in theory, the more competitive it becomes.Again, this
is essentially one of the benefits of economies of scale: being bigger allows you
to compete for more.To take an example: there are currently dozens of upstart
companies entering the plant-based meat market, offering a range of vegetable-
based ‘meats’.
But when P&G or Nestle begin to focus on this market, many of the upstarts
will fall away, unable to compete with these behemoths.

5.Tax Benefits
Acquisitions can sometimes bring tax benefits if the target company is in a
strategic industry or a country with a favorable tax regime.
The example of US pharmaceutical companies looking at smaller Irish
companies and moving their headquarters to Ireland to avail of its lower tax
base is a case in point. This is referred to as a ‘tax inversion’ deal.
The most well-documented version was a proposed $160 billion merger
between Pfizer and Allergan in 2016, subsequently scuppered by US
government intervention.

Present status of mergers and acquisitions in India

Mergers and acquisitions (M&A) in India are near an all-time high, led by more
first-time buyers than ever before, accounting for more than 80 per cent of the
deals closed in 2020 and 2021—a marked increase from less than 70 per cent
through 2017 to 2019. This is according to Bain & Company's new report -
India M&A: Acquiring to Transform.
There were 85 strategic deals valued at more than $75 million in 2021, out of
which the percentage of first-time buyers is almost 80 per cent. There were 80
strategic deals valued at more than $75 million in 2020, out of which the
percentage of first-time buyers, is 80 per cent. For the years 2020 and 2021, the
percentage of first-time buyers is highest compared to the percentage for the
years 2017 till 2019.
The nature of deals is more broad-based, including more mid-sized deals
ranging from $500 million- $1 billion, compared to the mega $5 billion deals
that drove activity in 2017-19. This greater deal momentum has been driven by
an accelerated disruption across sectors, and companies are using M&A to
transform their businesses for a post-Covid world. Cash reserves and foreign
direct investment inflows at their highest-ever levels, availability of private
equity (PE) dry powder is resilient, and interest rates are at a low. Armed with
this capital, one of the ways companies are responding to disruption and growth
expectations is through acquisitions.

What Is a Chief Executive Officer (CEO)?

A chief executive officer (CEO) is the highest-ranking executive in a company.
Broadly speaking, a chief executive officer’s primary responsibilities include
making major corporate decisions, managing the overall operations and
resources of a company, acting as the main point of communication between
the board of directors and corporate operations. In many cases, the chief
executive officer serves as the public face of the company. 
The CEO is elected by the board and its shareholders. They report to the chair
and the board, who are appointed by shareholders.