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Restructuring

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What is restructuring Restructuring strategies involve divesting some

business and acquiring new business, so as to put up new face to a company.

Tool to catapult value to customers as well as investors.

It’s a comprehensive process by which company can consolidate its business operations and strengthen its position for achieving its short term and long term objective.

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Need

• To expand business operations of company.• To carry out business of company more economically• To focus on core strength• Obtaining tax advantage by merging loss making co.

with profit making co.• To have access to better technology• To have better market share• To overcome significant problem in a co.• To become globally competitive• To eliminate competition between companies

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• Expansion• Ownership control (equity stake &

restructure)• Contraction( reduction cost/assets)

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Tools

• Amalgamation• Merger• Demerger• Joint venture• Acquisitions

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Amalmagation

• When two or more co. join toether to make new entity , more cos. Are absorbed with others and shareholders become shareholders of new co. and existence of amalgamted co. goes.

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Merger

• Horizontal• Vertical• Conglomerate

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Demerger

• Breakup of company into two.

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Restructuring Methods

• Sell offsSubsidiary is sold off because of low market

response.

Equity Carve outsSpin offsTracking stocks

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When do we restructure

• Too many businesses in slow growth, declining low margin, unattractive industries

• Too Many competitive weak businesses • Declining Market shares• Excessive debt burden with interest that

eat away profitability• Ill Chosen acquisitions • Emergence of new technology

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• Reorganization of company to 1.Improve its profitability2.To revive the firm from the situation of

bankruptcy, pay outs, heavy losses3.Corporate acquisitions

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What does it consist of

• Closing plants• laying off employees• moving operations• reorganization of operations (very popular)• cost cutting, cost cutting, cost cutting

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Responsibility of Restructuring

• Responsibility lies with CEO and a co may appoint new CEO for the same.

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