The document discusses corporate restructuring, which involves modifying a company's capital structure or operations when experiencing significant problems or financial jeopardy. It defines corporate restructuring and introduces the topic. It then discusses types of restructuring like financial and organizational restructuring. It outlines reasons for restructuring like change in strategy, lack of profits, or reverse synergy. It also covers characteristics, aspects to consider, and types of restructuring transactions like mergers, divestments, takeovers and more. Finally it discusses benefits of restructuring like increased market share, reduced competition, economies of scale and tax benefits.

1. CORPORATE
RESTRUCTURING

2. CORPORATE RESTRUCTURING
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DEFINITION
Corporate restructuring is an action taken by the corporate entity to modify its
capital structure or its operations significantly. Generally, corporate restructuring
happens when a corporate entity is experiencing significant problems and is in
financial jeopardy.

3. INTRODUCTION
CORPORATE RESTRUCTURING
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4. INTRODUCTION
The process of corporate restructuring is considered very important to eliminate all
the financial crisis and enhance the company’s performance. The management of the
concerned corporate entity facing the financial crunches hires a financial and legal
expert for advisory and assistance in the negotiation and the transaction deals.
Usually, the concerned entity may look at debt financing, operations reduction, any
portion of the company to interested investors. In addition to this, the need for
corporate restructuring arises due to the change in the ownership structure of a
company. Such change in the ownership structure of the company might be due to the
takeover, merger, adverse economic conditions, adverse changes in business such as
buyouts, bankruptcy, lack of integration between the divisions, over-employed
personnel, etc.
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5. TYPES OF CORPORATE
RESTRUCTURING
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6. Financial Restructuring
TYPES OF CORPORATE RESTRUCTURING
Organizational Restructuring
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This type of restructuring may take place due
to a severe fall in the overall sales because of
adverse economic conditions. Here, the
corporate entity may alter its equity pattern,
debt-servicing schedule, equity holdings, and
cross-holding pattern. All this is done to
sustain the market and the profitability of the
company.
Organizational Restructuring implies a
change in the organizational structure of a
company, such as reducing its level of the
hierarchy, redesigning the job positions,
downsizing the employees, and changing
the reporting relationships. This type of
restructuring is done to cut down the cost
and to pay off the outstanding debt to
continue with the business operations in
some manner.

7. REASONS
CORPORATE RESTRUCTURING
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8. REASONS FOR CORPORATE RESTRUCTURING
The management of the distressed entity attempts to improve its performance by eliminating certain divisions and
subsidiaries which do not align with the core strategy of the company. The division or subsidiaries may not appear
to fit strategically with the company’s long-term vision. Thus, the corporate entity decides to focus on its core
strategy and dispose of such assets to the potential buyers.
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Change in the Strategy
Lack of Profits
The undertaking may not be enough profit-making to cover the cost of capital of the company and may cause
economic losses. The poor performance of the undertaking may be the result of a wrong decision taken by the
management to start the division or the decline in the profitability of the undertaking due to the change in customer
needs or increasing costs.

9. REASONS FOR CORPORATE RESTRUCTURING
This concept is in contrast to the principles of synergy, where the value of a merged unit is more than the value of
individual units collectively. According to reverse synergy, the value of an individual unit may be more than the
merged unit. This is one of the common reasons for divesting the assets of the company. The concerned entity
may decide that by divesting a division to a third party can fetch more value rather than owning it.
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Reverse Synergy
Cash Flow Requirement
Disposing of an unproductive undertaking can provide a considerable cash inflow to the company. If the concerned
corporate entity is facing some complexity in obtaining finance, disposing of an asset is an approach in order to
raise money and to reduce debt

10. CHARACTERISTICS
CORPORATE RESTRUCTURING
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11. CHARACTERISTICS OF
CORPORATE RESTRUCTURING
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• To improve the Balance Sheet of the company (by disposing of the unprofitable division from its core business)
• Staff reduction (by closing down or selling off the unprofitable portion)
• Changes in corporate management
• Disposing of the underutilized assets, such as brands/patent rights.
• Outsourcing its operations such as technical support and payroll management to a more efficient 3rd party.
• Shifting of operations such as moving of manufacturing operations to lower-cost locations.
• Reorganizing functions such as marketing, sales, and distribution.
• Renegotiating labor contracts to reduce overhead.
• Rescheduling or refinancing of debt to minimize the interest payments.
• Conducting a public relations campaign at large to reposition the company with its consumers.

12. ASPECTS TO BE CONSIDERED
CORPORATE RESTRUCTURING
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13. ASPECTS TO BE CONSIDERED
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• Legal and procedural issues
• Accounting aspects
• Human and Cultural synergies
• Valuation and funding
• Taxation and Stamp duty aspects
• Competition aspects

14. TYPES
CORPORATE RESTRUCTURING
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15. TYPES OF CORPORATE RESTRUCTURING
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Corporate
Restructuring
Strategies
Merger
Demerger
Reverse Merger
Disinvestment
Takeover/Acquisition
Corporate
Restructuring
Strategies
Joint Venture (JV)
Strategic Alliance
Slump Sale

16. TYPES OF CORPORATE RESTRUCTURING
Concept where two or more business entities are merged together either by way of absorption or amalgamation or
by forming a new company. The merger of two or more business entities is generally done by the exchange of
securities between the acquiring and the target company.
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Merger
Demerger
Under this corporate restructuring strategy, two or more companies are combined into a single company to get the
benefit of synergy arising out of such a merger.
In this strategy, the unlisted public companies have the opportunity to convert into a listed public company, without
opting for IPO (Initial Public offer). In this strategy, the private company acquires a majority shareholding in the
public company with its own name.
Reverse Merger

17. TYPES OF CORPORATE RESTRUCTURING
When a corporate entity sells out or liquidates an asset or subsidiary, it is known as “divestiture”
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Disinvestment
Takeover/Acquisition:
Under this strategy, the acquiring company takes overall control of the target company. It is also known as the
Acquisition.
Under this strategy, an entity is formed by two or more companies to undertake financial act together. The entity
created is called the Joint Venture. Both the parties agree to contribute in proportion as agreed to form a new entity
and also share the expenses, revenues and control of the company.
Joint Venture (JV)

18. TYPES OF CORPORATE RESTRUCTURING
Under this strategy, two or more entities enter into an agreement to collaborate with each other, in
order to achieve certain objectives while still acting as independent organizations
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Strategic Alliance
Under this strategy, an entity transfers one or more undertakings for lump sum consideration. Under
Slump Sale, an undertaking is sold for consideration irrespective of the individual values of the assets
or liabilities of the undertaking
Slump Sale

19. BENEFITS OF CORPORATE RESTRUCTURING
▰ Increase in Market Share – Merger facilitates increase in market share of the merged company. Such rise in
market share is achieved by providing an additional goods and services as needed by clients. Horizontal merger
is the key to increasing market share. (E.g. Idea and Vodafone)
▰ Reduced Competition – Horizontal merger results in reduction in competition. Competition is one of the most
common and strong reasons for mergers and acquisitions. (HP and Compaq)
▰ Large size – Companies use mergers and acquisitions to grow in size and become a dominant force, as
compared to its competitors. Generally, organic growth strategy takes years to achieve large size. However,
mergers and acquisitions (i.e. inorganic growth) can achieve this within few months. (E.g. Sun Pharmaceutical
and Ranbaxy Pharmaceutical)
▰ Economies of scale – Mergers result in enhanced economies of scale, due to which there is reduction in cost
per unit. An increase in total output of a product reduces the fixed cost per unit.
▰ Tax benefits – Companies also use mergers and amalgamations for tax purposes. Especially, where there is
merger between profit making and loss-making company. Major income tax benefit arises from set-off and carry
forward provision u/s 72A of the Income-tax Act, 1961.
▰ New Technology – Companies need to focus on technological developments and their business applications.
Acquisition of smaller companies helps enterprises to control unique technologies and develop a
competitive edge. (E.g. Dell and EMC) 19

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21. CREDITS
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