Corporate restructuring can lead to changealong one or more of the three directioni) Assets and Portfolioii) Capital Structureiii) Organisation and Management
1) Portfolio and Assets Restructuringa) Mergers & Acquisitions› Merger of two or more legal entities or companies› Purchase of assets/business of another firm as agoing concern› Substantial acquisition of share of a legal entityleading to change of control in the sameb) Divestitures› Divestment of assets/business as going concern
› Divestment of controlling stake of a legal entityleading to change of control› Spin-off of a division or a subsidiary into a separatelegal entity› Split-off› Split-up› Equity carveout
2) Financial Engineering - Leading to changes inexisting capital structure› Alteration in debt-equity mix/debt-equity swaps› Issue of different classes of shares› Issue of different types of debts to meet fixedand working capital needs› Infusion of foreign debts and equity› Buyback of shares
3) Internal Streamlining and Business Process Re-engineering› Downsizing of head count› Cost reduction programmes› Closure of uneconomic units› Disposal of idle assets› Business process re-engineering
Acquisitions is capital intensive hence requirelenders. Diversification sometime destroy its value which iturn devolve the old shareholder and to regainfrom the low value it need new shareholders tobuy equity to get fund. Acquisition benefit the acquired firms rather thanacquiring firms. So as it destroy existingshareholders. To raise debt, to increase assets based capital,firm go for new shareholders by doing corporaterestructuring
To overcome from debt ridden financial reportorganisation go for corporate restructuring toget new shareholders to get fresh funds When organization failed to give adequateprofit margin, its share falls and to enhancethe value of share organization go forcorporate restructuring by going for mergingor acquisition, which leads to new lenders.