CORPORATE RESTRUCTURING

2.  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.
 Here are some examples of why corporate
restructuring may take place and what it can mean for
the company

3. Financial
Restructuring
Portfolio &
Asset
Restructuring
Organisation
&
Management
Restructuring

4.  Expansion: Mergers, Acquisitions, Takeovers, Tender
offer, Joint Venture
 Contraction: Sell offs, Spin offs, Split offs, Split ups,
Divestitures, Equity Carve outs
 Corporate Control: Takeover Defences, Share
Repurchases, Exchange Offers, Proxy Contests
 Changes in Ownership: Leveraged Buyout, Going
Private

5.  A merger refers to the process whereby at least two
companies combine to form one single company.
Business firms make use of mergers and acquisitions
for consolidation of markets aswell as for gaining a
competitive edge in theindustry.
 Merger is a financial tool that is used for enhancing
long-term profitability by expanding their operations.
Mergers occur when the merging companies have their
mutual consent as different from acquisitions, which
can take the form of a hostile takeover.

6. ABSORPTION CONSOLIDATION

7.  Merger or amalgamation may take two forms:
1. Absorption is a combination of two or more companies into an existing
company.
2. Consolidation is a combination of two or more companies into anew
company.
 In merger, there is complete amalgamation of the assets
and liabilities as well as shareholders’ interests and
businesses of the merging companies. There is yet another
mode of merger. Here one company may purchase another
company without giving proportionate ownership to the
shareholders’ of the acquired company or without
continuing the business of the acquired company

8.  Strategic benefit: competition, entry, risk and cost
reduction Complementary resources e.g. Technology
and Marketing
 Tax benefits :accumulated losses, unabsorbed
depreciation, government incentives, sales and excise
duty benefits
 Utilization of surplus funds
 Managerial effectiveness
 Diversification
 Lower financing costs
 Earnings growth etc.

9. HORIZONTAL
VERTICAL
CONGLOMERATE
CONCENTRIC
MERGER

10.  A Type of Merger occurred when two companies
competing in the same line of Business Activities.
 The Effect on the Market Would be Either Large or a
little to No Effects.
 Number of firms in an industry will be reduced due to
Horizontal Mergers and this may lead firms to Earn
huge monopoly profits.
 Horizontal mergers are regulated by government for
their negative effect on competition.
 Eg: In May 2010 Bank of Rajasthan with ICICI bank AND
ACC cement with Damodar cement.

11.  A Merger between two companies producing different
goods or services for one Specific Finished Products.
 It refer to a situation where a product manufacturer
merges with the supplier of Inputs or Raw Materials. Also
Known as Vertical Foreclosure´.
 Cost Reduction and Minimization Of Transportation cost.
 Two Types Of Vertical Mergers
 Backward Vertical Mergers.
 HLL &TATA tea with tea gardens in Assam & West Bengal.
 BPL. with Uptron colour picture.
 Forward Vertical Mergers
 Oil companies buying up service stations
 Disney’s With American Broadcasting Co

12.  A Merger Between Firms that are involved intotally
unrelated business activities .
 Two Types of Conglomerate mergers; i.e. Pure and
Mixed.
 The main reason behind this kind of Merger are
increasing Market Share, Synergy and Cross Selling.
 They also Merged to diversify and reduce their risk
Exposure.
 Ex: the Merger between Walt Disney company and the
American Broadcasting Company

13.  A type of merger where the two companies coming
together to share some common expertise that may
posses mutually advantageous. The Common Expertise
may be Managerial or Technological Know-how that
may not be Industry or Product Specific.
 In short combining two or more businesses in order to
pool expertise.
 A Merger between a Motor cycle Manufacturer and an
Automobile Manufacturer would be an Example

14.  Analysis of merger offer-motive ,impact on stock price
effect on brand image.
 Approval form Board of Directors of both the
companies for the merger
 Approval of merger by shareholders ,bankers, trustees
 Intimation to stock Exchange where these firms are
listed.

15.  Submission of application to the court
 Submission of general meeting report of the chairman
to court
 Hearing the petition & confirmation of merger.
 Filling Court Order with ROC by the firms.
 Integration of assets and liabilities

16.  This involves fusion of one or more companies where
the companies lose their individual identity and the
new company comes into existence to take over the
business of companies being liquidated.
 The merger of Brook Bond India Limited and Lipton
India Limited resulted in formation of a new company
Brook Bond Lipton India Limited

17.  The term takeover is understood to connote hostility.
When an acquisition is a ‘forced’ or‘ unwilling’
acquisition, it is called a takeover.
 A holding company is a company that holds more than
half of the nominal value of the equity capital of
another company, called a subsidiary company, or
controls the composition of its Board of Directors. Both
holding and subsidiary companies retain their separate
legal entities and maintain their separate books of
accounts

18.  This involves fusion of a small company with a large
company where the smaller company ceases to exist
after the merger.
 The merger of TATA OIL MILLS company limited
(TOMCO) with Hindustan lever limited.(HLL) is an
example of absorption

19.  A tender offer is a formal offer to purchase a given
number of a company’s shares at a specific price.
 Tender offer can be used in two situations.
1. First, the acquiring company may directly approach the
target company for its takeover. If the target company does
not agree, then the acquiring company may directly
approach the shareholders by means of a tender offer.
2. Second, the tender offer may be used without any
negotiations, and it may be tantamount to a hostile
takeover.

20.  This involves making a public offer for acquiring the
shares of a target company with a view to acquire
management control in that company.
 Take over by TATA Tea of consolidated coffee limited
(CLL) is an example of tender offer where more than
50% of share holders of CLL sold their holdings to TATA
Tea at the offered price which was more than the
investment price.

21.  Acquisition may be defined as an act of acquiring effective
control over assets or management of a company by
another company without any combination of businesses
or companies. A substantial acquisition occurs when an
acquiring firm acquires substantial quantity of shares or
voting rights of the target company
 This involves buying assets of another company. The assets
may be tangible assets like manufacturing units or
intangible like brands.
 HLL buying brands of lakme is an example of asset
acquisition

22.  This Involves two companies coming together and
forming a new company whose ownership is changed.
Generally this strategy is adopted by MNC’s to enter
into foreign companies.
 DCM Group and Daewoo Motors entered into a joint
venture to form DCM Daewoo Limited to manufacture
auto mobiles in India

23.  Demergers means split or division of a company. Such
divisions may take place for various internal or external
factors. Internal factors generally consist of split in the
family rather than lack of competition on the part of
management.
 For Example DCM Limited was divided into four
separate companies which are being managed by
different family members of Late Shri Ram.

24.  This type of demerger involves division of company
into wholly owned subsidiary of parent company by
distribution of all its shares of subsidiary company on a
pro-rata basis.
 For Example Kotak Mahindra finance limited formed a
subsidiary called Kotak Mahindra Capital Corporation
by spinning off its investment banking division

25.  Spin offs are a distribution of subsidiary shares to
parent company shareholders:
 As such, no money (necessarily) comes into the parent
company as a result
 No shares (or assets) of the subsidiary are sold to the
market(IPO) or to acquirer.
 Eg; Dr.Reddy formed new drug development company
“Perlecan Pharma”
 Sun Pharma demerged its R&D as a separate entity Sun
Pharma Advance Research company to reduce R&D
cost

26.  The firm sell a part (20% or less) of its wholly-owned
subsidiary’s common stock in the market. This is
similar to spin –offs, expect that some part of share
holders of this subsidiary company is offered to public
through a public issue and the parent company
continues to enjoy control over the subsidiary
company by holding controlling interest in it

27.  This type of demerger involves the division of the
parent company into two or more separate companies
where parent company ceases to exist after the
demerger. New business entities took place for parent
firm

28.  These are sale of segment of a company for cash or for
securities to an outside party.
 Selling assets, divisions, subsidiaries to another
corporation or combination of corporations or
individual

29.  Selling corporation typically receives consideration for
the assets sold
 Cash
 Securities
 Other assets
 Divestitures are typically taxable events for selling
corporation (new basis for purchaser)
 Example of Divestiture: JAGUAR LAND ROVER was
divested from FORD MOTOR

30.  This involves sale of tangible or intangible assets of a
company to generate cash.

31.  In the conventional method, thus a company is absorbed
by the profitable one (called normal merger). On the other
hand, if reverse situation takes place i.e. if sick company
extends its embracing arm to the profitable company and
in turn absorbs it in its fold, this action is called reverse
merger. It’s a merger of healthy company into a loss making
company as compared to a normal merger where weaker
units merge into stronger one.
 The first case of reverse merger formulated by BIFR
envisaged the merger of healthy company Sagar Real Estate
Developer Limited with sick textile company SLM Maneklal
industries limited.