Techniques of corporate restructuring, equity carve out, reverse merger,management buy-in, management buy-out, leveraged buy-out, divestiture, liquidation,slump sale,IPR,spin-off

1. CORPORATE
RESTRUCTURING

2. Meaning of corporate
Restructuring
The Corporate Restructuring is the process of making
changes in the composition of a firm’s one or more
business portfolios in order to have a more profitable
enterprise.
Simply, reorganizing the structure of the organization
to fetch more profits from its operations or is best
suited to the present situation.

3. Objectives of corporate
restructuring
Corporate Restructuring is concerned with arranging the business activities of the
corporate as a whole so as to achieve certain predetermined objectives at corporate
level. Such objectives include the following:
— orderly redirection of the firm's activities;
— deploying surplus cash from one business to finance profitable growth in another;
— exploiting inter-dependence among present or prospective businesses within the
corporate portfolio;
— risk reduction; and
— development of core competencies

4. Techniquesofcorporaterestructuring
Expansion techniques
Divestment techniques
Other techniques

5. Expansion techniques
• Mergers
• Takeovers
• Joint venture
• Strategic alliances
• Franchising
• Intellectual property rights

6. Merger
Merger is the combination of two or more companies
which can be merged together either by way of
amalgamation or absorption.
The combining of two or more companies, is generally by
offering the stockholders of one company securities in the
acquiring company in exchange for the surrender of their
stock

7. Takeover
Takeover means an acquirer takes over the control of
the target company. It is also known as acquisition.
Normally this type of acquisition is undertaken to
achieve market supremacy. It may be friendly or hostile
takeover.

8. Joint venture
A joint venture is an entity formed by two or more
companies to undertake financial activity together. The
parties agree to contribute equity to form a new entity and
share the revenues, expenses, and control of the company.
It may be Project based joint venture or Functional based
joint venture.

9. Strategic alliances
Strategic alliance is an arrangement or
agreement under which two or more
firms cooperate in order to achieve
certain commercial objectives.

10. Franchising
Franchising may be defined as an arrangement where one party
(franchiser) grants another party (franchisee) the right to use
trade name as well as certain business systems and process, to
produce and market goods or services according to certain
specifications.
It is an important means of doing business in several countries
and represents an effective combination of the advantages of
large business with the motivation and adaptation capabilities
of small or medium scale enterprises.

11. Intellectual property rights
The worth of a company lies more in its intangible assets
(patents, trademarks, brands, copyrights etc.) Than tangible
assets (land, building, plant & machinery).The intellectual
property rights give real value to a company.
Patents, trademarks and strong brands lead to higher sales,
economies of scale and profits.

12. Divestment techniques
Divestitures/Sell-off
Demerger/spin-off
Slump Sale
Management Buy-Out
Leveraged Buy-Out
Liquidation

13. Divestitures/Sell-off
A divestiture (sell-off) is the disposal of company’s
assets or a business unit through a sale, exchange,
closure, or bankruptcy

14. Demerger/spin-off
The act of splitting off a part of an existing company
to become a new company, which operates
completely separate from the original company.
Shareholders of the original company are usually
given an equivalent stake of ownership in the new
company. A demerger is often done to help each of
the segments operate more smoothly, as they can
now focus on a more specific task.

15. Slump sale
When a company sells or disposes the whole or substantially the
whole of the undertaking for a predetermined lumpsum amount
as sale consideration is called ‘slump sale’.
This basically means that when a slump sale happens, all the
moveable/immovable assets, debtors, creditors, stock-in-trade,
investments, liabilities, contracts, licenses, obligations, rights,
intellectual properties, employees, etc. concerned with the
business undertaking will be transferred to the purchaser.

16. Management Buy-Out
• MBO is the purchase of a business by its management
when the existing owners are trying to sell business to
third parties due to its slow growth or lack of
managerial skills in running the business. Funding
usually comes from a mix of personal resources,
private equity financiers, and seller-financing.

17. Leveraged Buy-Out
• In a leveraged buyout, the company is purchased
primarily with borrowed funds. In fact, as much of 90%
of the purchase price can be borrowed. This can be a
risky decision, as the assets of the company are
usually used as collateral, and if the company fails to
perform, it can go bankrupt because the people
involved in in the buyout will not be able to service
their debt

18. Liquidation
Liquidation occurs when a firm's business is terminated.
Assets are sold, proceeds are used to pay creditors, and
any leftovers are distributed to shareholders.
In case of technological obsolescence, lack of market for
the company’s products, financial losses, cash shortages,
lack of managerial skills, the owners may decide to
liquidate the business to stop further aggravation of losses.

19. Other techniques
Going Private
Share Re-purchase
Management Buy-in
Reverse merger
Equity carve-out

20. Going private
A going private transaction is one in which a public
company is converted into private ownership.
The management of the widely held company may
decide to go private by purchase of stocks from the
outside public and delisting the shares in the stock
exchanges where the shares are traded.

21. Share repurchase
A share repurchase is a transaction whereby a company
buys back its own shares from the marketplace. A
company might buy back its shares because
management considers them undervalued.
The company buys shares directly from the market or
offers its shareholders the option of tendering their
shares directly to the company at a fixed price.

22. Management buy-in
In management buy-in, a company is purchased by a
manager or a management team from the outside the
company. The target company is acquired by these
outside investors when they feel that the company is
underperforming and the company’s products can
generate greater than current yields with the change in
current business strategy and/or management.

23. Reverse merger
A reverse merger is a merger in which a private
company becomes a public company by acquiring it.
It saves a private company from the complicated
process and expensive compliance of becoming a
public company. Instead, it acquires a public company
as an investment and converts itself into a public
company.

24. Equity carveout
It is a situation where a parent company sells portion of
its equity in a wholly owned subsidiary to the general
public or to a strategic investor.
An equity carveout enable the parent to generate cash
inflow which can be used for further investments.

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