MERGERSANDAMALGAMATI

ON
Cor
por
ateRest
ruct
uri
ng

I
NTRODUCTI
ON
Thepr
ocessofr
eor
gani
zi
ngoneormor
easpect
soft
hebusi
nessofacompanyor
f
inanci
alst
ruct
uref
ori
ncr
easi
ngi
tsef
fi
ciencyandpr
ofi
tabi
l
ityi
sknownascor
por
ate
r
est
ruct
uri
ng.Accor
dingt
oPr
asannaChandr
a“Cor
por
ater
est
ruct
uri
ngr
efer
stoa
br
oadar
rayofact
ivi
ti
est
hatexpandorcont
ractaf
ir
m’soper
ati
onsorsubst
ant
ial
l
y
modi
fyi
tsf
inanci
alst
ruct
ureorbr
ingaboutasi
gni
fi
cantchangei
nit
sor
gani
zat
ional
st
ruct
ureandi
nter
nalf
unct
ioni
ng.
”Thus,t
het
erm cor
por
ater
est
ruct
uri
ngi
san
umbr
ell
ater
mthatencompassesf
ourdi
sti
nctgr
oupsofact
ivi
ti
esv
iz.Expansi
on,
Cont
ract
ion,
Financi
alr
est
ruct
uri
ngandOr
gani
zat
ional
Rest
ruct
uri
ng.

Thepr
ocessofcor
por
ater
est
ruct
uri
ngessent
ial
l
yinv
olv
essi
gni
fi
cantr
eor
gani
zat
ion
ofasset
sandl
i
abi
l
iti
esoft
heor
gani
zat
ionsoast
oconductt
hebusi
nessoper
ati
ons
i
nanef
fi
cient
,ef
fect
iveandcompet
it
ivemannerwi
tht
heunder
lyi
ngobj
ect
iveof
i
mpr
ovi
ngt
hequal
i
tyandquant
it
yoft
hef
utur
ecashf
low st
reamsandt
her
eby
i
ncr
easi
ngt
heor
gani
zat
ion’
smar
ketshar
e,br
andpower
,andsy
ner
gies.I
nanut
shel
l
,
cor
por
ater
est
ruct
uri
ng i
s a compr
ehensi
ve pr
ocess bywhi
ch a companycan
consol
i
dat
eit
s busi
ness oper
ati
ons and st
rengt
hen i
tsf
inanci
alposi
ti
on f
or
achi
evi
ngi
tsshor
t-
ter
m andl
ong-
ter
m cor
por
ateobj
ect
ives.

Cor
por
ater
est
ruct
uri
ng,si
gni
fi
cantf
orsur
viv
alofa company i
n compet
it
ive
env
ironment
,hasgai
nedconsi
der
abl
eimpor
tanceal
lov
ert
hewor
ldbecauseof
f
ier
ce compet
it
ion, gl
obal
i
zat
ion and r
api
d t
echnol
ogi
cal enhancement
s.
Rest
ruct
uri
ngasperOxf
orddi
cti
onar
ymeanst
ogi
veanew st
ruct
uret
o,r
ebui
l
dor
r
ear
range.AsperCol
l
insEngl
i
shdi
cti
onar
y,meani
ngofcor
por
ater
est
ruct
uri
ngi
sa
change i
nthe busi
ness st
rat
egyofan or
gani
zat
ion r
esul
ti
ng i
n di
ver
sif
icat
ion,
cl
osi
ngpar
tsoft
hebusi
ness,et
c.,t
oincr
easei
tsl
ong-
ter
m pr
ofi
tabi
l
ity
.Cor
por
ate
r
est
ruct
uri
ngi
sdef
inedast
hepr
ocessi
nvol
vedi
nchangi
ngt
heor
gani
zat
ionofa
busi
ness.
Cor
por
ater
est
ruct
uri
ngcani
nvol
vemaki
ngdr
amat
icchangest
o abusi
nessby
cut
ti
ng outormer
ging depar
tment
s.I
timpl
i
es r
ear
rangi
ng t
he busi
ness f
or
i
ncr
easedef
fi
ciencyandpr
ofi
tabi
l
ity
.Inot
herwor
ds,i
tisacompr
ehensi
vepr
ocess,
bywhi
chacompanycanconsol
i
dat
eit
sbusi
nessoper
ati
onsandst
rengt
heni
ts
posi
ti
onf
orachi
evi
ngcor
por
ateobj
ect
ives-
syner
giesandcont
inui
ngascompet
it
ive
andsuccessf
ulent
it
y.

REASONSFORCORPORATERESTRUCTURI
NG

1. Thegl
obal
izat
ionofbusi
nesshascompel
l
edcompani
est
oopennew expor
t
housest
omeetgl
obalcompet
it
ion.Gl
obalmar
ketconcepthasnecessi
tat
edmany
compani
est
orest
ruct
ure,becausel
owestcostpr
oducer
sonl
ycansur
viv
eint
he
compet
it
ivegl
obal
mar
ket
s.

2.Changedf
iscalandgov
ernmentpol
ici
esl
i
keder
egul
ati
on/decont
rolhasl
ed
manycompani
est
ogof
ornewermar
ket
sandcust
omersegment
.

3.Rev
olut
ioni
ninf
ormat
iont
echnol
ogyhasmadei
tnecessar
yforcompani
est
o
adoptnewchangesf
ori
mpr
ovi
ngcor
por
ateper
for
mances.

4. Many compani
es hav
e di
vi
sional
ized i
nto smal
l
er busi
nesses. Wr
ong
di
vi
sional
i
zat
ionst
rat
egi
eshav
eledt
orev
ampt
hemsel
ves.Pr
oductDi
vi
sionswhi
ch
do notf
iti
ntot
hecompany
’smai
nli
neofbusi
nessar
ebei
ngdi
vest
ed.Fi
erce
compet
it
ioni
sfor
cingt
hecompani
est
orel
auncht
hemsel
ves.

5.I
mpr
ovedpr
oduct
ivi
tyandcostr
educt
ionhasnecessi
tat
eddownsi
zi
ngof
thewor
k
f
orce-bot
hatwor
ksandatmanager
ial
lev
el.

6.Conv
ert
ibi
li
tyofr
upeehasat
tract
edmedi
um-
sizedcompani
est
ooper
atei
nthe
gl
obal
mar
ket
s.

7.Compet
it
ive busi
ness necessi
tat
ed t
o hav
e shar
pfocus on cor
e busi
ness
act
ivi
ti
es,t
ogai
nsy
ner
gybenef
it
s,t
omi
nimi
zet
heoper
ati
ngcost
s,t
omaxi
mize
ef
fi
ciencyi
noper
ati
onandt
otapt
hemanager
ialski
l
ltot
hebestadv
ant
ageoft
he
f
ir
m.

8.Economi
esofscal
ecanbeachi
evedbyconsol
i
dat
ingt
hecapaci
ti
esandby
expansi
ono act
ivi
ti
es.

9.Byr
est
ruct
uri
ngt
heent
erpr
ise,asi
ckcompanycanbesuccessf
ull
yrev
ivedand
r
ehabi
l
itat
edandcanbebr
oughtbackt
opr
ofi
tabl
eli
nes.

10. Wi
tht
hei
ntegr
ati
onofsi
ckuni
tint
othesuccessf
uluni
t,t
headj
ust
mentof
unabsor
beddepr
eci
ati
onandwr
it
eof
fofaccumul
atedl
ossi
spossi
bleandt
her
eby
t
hesuccessf
uluni
tcanhav
est
rat
egi
ctaxpl
anni
ng.

11. Cor
por
ater
est
ruct
uri
ng i
ncl
udes f
inanci
alr
eor
gani
zat
ion whi
ch br
ings t
he
companyt
oachi
eveadesi
redbal
anceofdebtandequi
ty,t
her
ebyr
educi
ngt
he
ov
eral
lcostofcapi
tal
andf
inanci
alr
isks.

12.Ther
est
ruct
uri
ngpr
ocessf
aci
l
itat
eshor
izont
alandv
ert
icali
ntegr
ati
on,t
her
eby
t
hecompet
it
ioni
sel
i
minat
edandt
hecompanycanhav
eaccesst
oregul
arr
aw
mat
eri
alsandr
eachi
ngnew mar
ket
sandaccessi
bil
i
tyt
osci
ent
if
icr
esear
chand
t
echnol
ogi
caldev
elopment
s.

SYMPTOMSFORCORPORATERESTRUCTURI
NG

a.OPERATI
ONALSYMPTOMS

1.Cont
inuousl
yreduci
ngempl
oyeepr
oduct
ivi
ty

2.Hi
ghempl
oyeet
urnov
er.

3.Gr
owi
ngi
nci
dencesofi
ndust
ri
alr
elat
ionspr
obl
ems,
product
ionst
oppages.

4.Del
aysi
nsuppl
ychai
nanddi
str
ibut
ionchai
n.

5.Weakmar
ketf
eedbackonpr
oduct
s,pr
icesandpr
omot
ional
pol
i
cies

6.Decl
i
nei
nnewmar
ketdev
elopmentef
for
ts.

7.Hi
ghassetmai
ntenanceandr
epai
rs.

8.Di
str
ibut
edr
ati
obet
weent
henumberofcor
eempl
oyeesandsuppor
templ
oyees
andt
het
imeandef
for
tspenti
ncor
eper
for
mancesandsuppor
tper
for
mances.
9.Uncomf
ort
abl
erel
ati
onswi
th ext
ernalst
akehol
der
sli
kecont
ract
ors,v
endor
s,
gov
ernmentdepar
tment
s,consul
tant
set
c.

10.I
ncr
easi
ng conf
usi
on i
n di
vi
sional
,indi
vi
dualand t
err
it
ori
alper
for
mance
account
ing,
appr
aisal
s,et
c.

B.STRATERGI
CSYMPTOMS

1.Sl
oweddowndesi
ref
orper
pet
ual
growt
handweal
thaccel
erat
ion.

2.Gr
owi
ngmi
smat
chbet
weenst
rat
egyf
ormul
ati
onbyowner
sandmanager
s.

3Decl
i
ningmar
ketl
eader
shi
ptoi
nfl
uencet
hegov
ernment
,compet
it
ors,v
endor
s,
di
str
ibut
orsandcust
omer
s.

4.I
mbal
ancebet
weenshor
t-
ter
mtact
icsandl
ong-
ter
m st
rat
egi
es.

C.FI
NANCI
ALSYMPTOMS

1.I
ncr
easi
ngoper
ati
ngcost
sandcostoff
inance

2.Fal
l
ingshar
epr
icesi
nthemar
ket
,wi
thoutanear
-f
utur
escopef
orcor
rect
ion.

3.Decl
i
ningear
ningr
ati
osf
ordi
vi
sions,
vendor
s,di
str
ibut
orsandshar
ehol
der
s.

4.I
ncr
easi
ngcost
satt
hesuppl
y-
sideanddemandsi
deoft
hev
alue-
chai
n.

5.I
ncr
easi
ngpr
icesofl
i
censes,
copy
-ri
ght
s,pat
ent
s,et
c.

6.Gr
owi
ng cost
s on mar
ket
ing oper
ati
ons and hence gr
owi
ng pr
essur
e on
manuf
act
uri
ngcost
s.

7.Gr
owi
ngcost
sofcor
rect
iveef
for
ts,r
evi
sionsorr
eincar
nat
ionofpr
oduct
sand
ser
vices.

8.Unusualcostofwast
age,i
nef
fi
cienci
es,i
dlet
ime,i
nsur
ance,mai
ntenance,
del
i
ver
ies,
etc.

9.I
ncr
easedcost
sofappl
i
edr
esear
ch,
conceptsal
eandt
ake-
offef
for
ts.

11.Heav
ycostconnect
edwi
thmar
ketdev
elopment
,rest
ri
cti
ngcompet
it
orsent
ryt
o
est
abl
i
shedornewmar
ket
s,up-
gradat
ionofconsumert
ast
es,
etc.
12.Ser
ious dr
awbacks and pr
obl
ems i
nthe i
mpl
ement
ati
on oft
ransf
erpr
ice
mechani
sm.

MOTI
VESBEHI
NDCORPORATERESTRUCTURI
NG

Ther
ear
efoursepar
ateset
sofr
easonsf
ordi
ff
erentchoi
ceofcor
por
atest
ruct
uri
ng
–

a.Expansi
on,

b.Cor
por
atecont
rol

c.Cont
ract
ionand

d.Changei
nowner
shi
pst
ruct
ure

MOTI
VEBEHI
NDEXPANSI
ON

(
a.)Gr
owt
h:Ev
erycompanywant
stogr
ow andcor
por
ater
est
ruct
uri
ngpr
ovi
des
way
sfort
hecompani
est
othr
owof
fcashf
lowsbey
ondi
tsi
nter
nalneeds.Pr
esent
dayofgl
obal
i
zat
iondemandsanabsol
utel
evelofsi
zesi
mpl
ytobeabl
etocar
ryout
t
heoper
ati
onsoft
hecompany
.

(
b)Technol
ogy
:Technol
ogypl
aysani
mpor
tantr
oleasadr
iveri
nexpansi
onst
rat
egy
.
Gener
all
ya f
ir
m wi
thi
mpr
oved and super
iort
echnol
ogywant
sto engi
neeri
ts
t
echnol
ogi
calsuper
ior
it
ybyacqui
ri
ngf
ir
msofi
nfer
iort
echnol
ogy
.Ther
ever
sei
s
al
sot
rueast
hef
ir
m wi
thi
nfer
iort
echnol
ogymaypr
efert
oacqui
ret
echnol
ogi
cal
l
y
super
iorf
ir
mtoshar
peni
tscompet
it
iveedge.

(
c)Pr
oductAdv
ant
ageandPr
oductDi
ff
erent
iat
ion:
Thi
sreasonget
smor
erel
evance
i
nexpansi
oni
nter
nat
ional
l
ywhenaf
ir
mfi
ndsaccept
ancef
ori
tspr
oductabr
oad.

(
d)Gov
ernmentpol
icy
:Di
ff
erentr
egul
ati
ons,t
ax bur
den and ot
herr
est
ri
cti
ons
i
mposed byt
hegov
ernmental
so i
nducecompani
est
oincr
easesi
ze.To enj
oy
speci
fi
cadv
ant
agei
ndi
ff
erentz
onesandi
ndi
ff
erenteconomi
es,company
’sf
ir
st
choi
cegoesf
oracqui
ri
ngaf
ir
m wi
thexi
sti
ngf
aci
l
iti
esi
nthatpl
ace.

(
e)Pol
it
ical
/Economi
cSt
abi
li
ty:Pol
i
ticalst
abi
l
ity
,i.
e.,t
hef
requencywi
thwhi
ch
gov
ernmentchanges,t
heor
deroft
ransf
err
ingpowerandt
hechangei
nthepol
i
cy
andout
lookduet
o changei
ntheadmi
nist
rat
ionbecomesadeci
siv
efact
ori
n
expansi
on.

(
g)Di
ff
erent
iall
abourcost
s,Pr
oduct
ivi
ty:Di
ff
erencei
nlabourcost
sindi
ff
erent
geogr
aphi
cregi
onwi
thi
tsassoci
atedpr
oduct
ivi
tycer
tai
nlycr
eat
esani
mpacti
n
moni
tor
ingcompani
est
oexpand.

(
h)Di
ver
sif
icat
ion:Oneoft
hei
mpor
tantdr
iver
sforexpansi
oni
sthedi
ver
sif
icat
ion
bot
h geogr
aphi
cal
l
yand bypr
oductl
i
ne.I
tmaycome i
nthe f
orm ofv
ert
ical
i
ntegr
ati
on,
bot
hfor
war
dandbackwar
d,whi
chal
sohel
psi
nreduci
ngcost
s.

MOTI
VEBEHI
NDCORPORATECONTROL

(
a.)Ut
il
izat
ionofSur
plusCash-I
nor
dert
oincr
easet
heshar
ehol
der
sret
urnand
f
inal
l
ytheweal
th oft
heshar
ehol
der
s,t
hef
ir
m mayunder
take t
hest
rat
egyof
di
str
ibut
ingsur
pluscashandt
her
ebyenhanci
ngt
heear
ningspershar
e.

(
c)EnhancementofVot
ingPower-Anot
heri
mpor
tantmot
iveofcor
por
atecont
roli
s
t
oenhancet
hev
oti
ngorcont
rol
l
ingpoweroft
hepr
omot
erswi
thoutspendi
ngown
money
.

(
d)Pr
event
ingUnder
val
uat
ion-I
fthemanagementbel
i
evest
hatt
hecommonst
ock
oft
hecompanyi
sunder
val
uedi
nthemar
ket
,theycanenhancecont
rolont
he
v
aluat
ionofshar
esbybuy
backoft
heshar
eswi
thav
iewt
orecogni
zet
ruev
alueof
t
hoseshar
esast
heannouncebuy
backpr
icewi
l
linv
ari
abl
ybehi
ghert
hant
he
pr
evai
l
ingmar
ketpr
ice.

(
e)Ant
i-
takeov
erDef
ence-I
fthei
nsi
der
sjudget
hef
ir
mtobeunder
val
ued,
theymay
hav
econcer
nst
hatt
hef
ir
m maybesubj
ectt
otakeov
erbi
datr
elat
ivel
ysmal
l
pr
emi
um.Thel
argepr
emi
um i
nrepur
chaset
enderof
fermayconv
eyi
nfor
mat
iont
o
t
heon-
insi
der
sthatt
hev
alueoft
heshar
esi
satl
eastashi
ghasconv
eyedbyt
he
pr
emi
um andmaybeper
hapsev
enhi
gheri
nthef
utur
e.

MOTI
VESBEHI
NDCONTRACTI
ON
a.I
mpr
ovi
ngPer
for
mance-Theaccount
abi
l
itycr
eat
edbyr
est
ruct
uri
ngt
hroughde-
mer
gerof
teni
mpr
ovesper
for
mance,andi
nvest
orsal
sobenef
itf
rom t
hegr
eat
er
v
isi
bil
i
tyoft
hede-
mer
gedent
it
iest
oanal
yst
sandt
hepubl
i
c.

b.Boomi
ngI
ndependence-De-
mer
geri
sint
endedt
opr
omot
eindependenceast
he
separ
atecompanycan oper
atef
reel
yati
tsown di
scr
eti
on.Of
ten t
hiski
nd of
r
est
ruct
uri
ng i
s done t
o mov
e asset
sto owner
s who can ut
il
ize t
hem mor
e
ef
fect
ivel
y.Thi
shel
pst
heeconomi
csy
stem t
omov
easset
stot
hei
rhi
ghestv
alued
user
s.

c.Ef
for
tto Unl
ear
n-Somede-
mer
geref
for
tisanat
temptt
ocor
rectpr
evi
ous
i
nvest
mentdeci
sionsmat
eri
ali
zedt
hroughmer
ger
sandacqui
sit
ions.Thef
ir
ms’
i
nabi
l
ityt
o ef
fect
ivel
y expl
oitt
he possi
ble oppor
tuni
ti
es t
hrough consol
i
dat
ion,
mot
ivat
ethem t
osal
vageapor
ti
onoft
hei
rinv
est
ment
sbysepar
ati
ngwher
ethe
oppor
tuni
ti
escoul
dbeexpl
oit
edmor
eef
fect
ivel
y.

d.St
rat
egi
cAdj
ust
ment-Somet
imesdi
vest
urei
nvol
vessel
l
ingt
oav
alue-
incr
easi
ng
buy
er,whi
chi
spl
annedatt
het
imeofmer
gerandacqui
sit
ionact
ivi
ty.Sucht
ypeof
di
vest
it
urei
spr
epl
annedbecauset
heymayr
epr
esentapoorf
itt
otheacqui
ri
ngf
ir
m.

e.I
ncr
easi
ngv
alue-De-
mer
gerr
epr
esent
shar
vest
ingv
aluebyunl
ocki
ngt
hehi
dden
v
alue.Bymaki
ngf
inanci
alandmanager
ialr
esour
cesav
ail
abl
eandconcent
rat
ingon
t
hecor
ecompet
encyt
hef
ir
misabl
etoenhanceshar
ehol
der
’sv
alueaswel
lav
alue
oft
hef
ir
m.

MOTI
VEBEHI
NDCHANGEI
NOWNERSHI
P

a.Manoeuv
ringLev
erage:Themosti
mpor
tantr
easonf
orchangesi
nowner
shi
p
st
ruct
ure,whet
herdebt
/pr
efer
red st
ock i
s exchanged f
orcommon st
ock,or
conv
ersel
ycommonst
ockf
ormor
eseni
orcl
aimst
omanoeuv
rel
ever
ageoft
hef
ir
m.

b.Al
ter
ati
on i
ntheCont
rolSt
ruct
ure:Bypur
chasi
ng subst
ant
ialper
cent
ageof
shar
esorbyi
nit
ial
publ
i
cof
fer
ingst
hef
ir
mswantt
oreshuf
fl
ethev
oti
ngr
ight
soft
he
shar
ehol
der
stochanget
hecont
rol
pat
ter
noft
hef
ir
m.

c.Pr
ovi
dingf
air
nesst
omi
nor
it
yShar
ehol
der
s:Acr
it
icalel
ementi
nrest
ruct
uri
ng
act
ivi
ti
es t
hrough goi
ng pr
ivat
etr
ansact
ions i
sfai
rness t
o mi
nor
it
yorout
side
shar
ehol
der
stoav
oidaccusat
ionsofsecur
it
yfr
audagai
nstcont
rol
l
ingshar
ehol
der
s.

d.Changi
ngt
henat
ureofFi
rm:I
faf
ir
m want
stocomeoutoft
her
egul
ati
onsof
Secur
it
yandExchangeboar
dofr
espect
ivecount
ryi
tmaypr
efert
hatasmal
lgr
oup
ofi
nvest
orsbuyt
heent
ir
eequi
tyi
nter
est
.