CORPORATE RESTRUCTURING

Corporate restructuring implies activities related to expansion/ contraction of a firms operations or changes in its assets or financial or ownership structure. It includes activities such as mergers, purchases of business units, takeovers, slump sales, demergers, organizational restructuring. There may be a single objective for Corporate Restructuring but most of the times there are multiple objectives of Corporate Restructuring.

OBJECTIVES OF CORPORATE RESTRUCTURING

Positioning the business to be more competitive By acquiring focus. By acquiring competition. By increasing efficiency By reducing expenses By acquiring larger market share or capacities By unlocking values Surviving in an adverse economic climate. Taking the business in an entirely new direction.

MERGERS
A merger refers to a combination of two or more companies into one company. It may involve absorption or consolidation. In an absorption, one company acquires another company . In a consolidation, two or more companies combine to form a new company . In India, mergers called amalgamations in legal parlance are usually of the absorption variety.th acquiring company acquires the assets and liabilities of the acquired company.

TYPES OF MERGERS
HORIZONTAL MERGER

Is a merger when two or more firms dealing in similar lines of activity combine together. Ex: a co. making footwear combines with another company making footwear. Is a merger that involves two or more stages of production/ distribution that are usually separate. Ex: a footwear co. combines with a leather tannery or with a chain of shoe retail stores. A combination of two or more organizations unrelated to each other either in terms of customer functions, customer groups, or alternative technologies used Ex: a footwear co. combines with a pharmaceutical company.

VERTICAL MERGER

CONGLOMERATE MERGER

REASONS FOR MERGERS

Utilization of surplus funds Diversifying products or services Gaining a competitive advantage or larger market share Increased capabilities Managerial effectiveness Cutting costs Surviving Acquire Resources and Skills

Growth Utilization of tax shields

LEGAL PROCEDURE FOR MERGER

Examination of object clauses Filing the order with the registrar Transfer of assets & liabilities

Intimation to stock exchanges

Petition to the NCLT for confirmation & passing of NCLT

Issue of shares & debentures

Approval of the draft amalgamation proposal by the respective boards

Holdings of meetings of shareholders & creditors

Application to the National Company Law Tribunal (NCLT)

Dispatch of Notice to shareholders & Creditors

BENEFITS OF MERGER
International Competition Greater investment in R&D Greater Efficiency

Protect an industry from closing

Diversification

Product development (innovation)

Increase market share

Management talent and experts

EXAMPLES OF MERGERS & ACQUISITIONS

IDBI (Industrial Development bank of India) and its own subsidiary. The deal was worth $174.6 million (Rs. 7.6 billion in Indian currency)

Centurion Bank and Bank of Punjab - worth $82.1 million (Rs. 3.6 billion in Indian currency), this merger led to the creation of the Centurion Bank of Punjab with 235 branches in different regions of India.

CONT

Mahindra & Mahindra acquire Schoneweiss.

Vodafone took over Hutchison-Essar in India.