Restructuring in corporate businesses, its strategic forms & financing methods are interpreted. The basic forms are highlighted using a suitable example & the control, or transfer of finances as well the raising of the equity capital in business environment.

1. 4/9/2015 1
RESTRUCTURING
Business capacity or portfolio
•Capital structure
•Ownership and/or Control
Disinvesting from non profitable business
`
Disinvesting from non core business
`
Lack of innovation &
growth in core business activities
`
Aiming for survival in market competition
`
TRAITS OF A POTENTIAL COMPANY
CONVERGE IN
MARKET OPERATIONS
Growth
Balanced
D/E Ratio
Strong
Innovation/
portfolio
1
2
3
1 Improved D/E Ratio
2* ROCE ; ROE ; ROIC
Decision making
Organization structure
Corporate Restructuring - Strategic Forms & Financing Methods
Policy framing
1 Product / service improvements
2 New product/service lines
Debt Restructuring
Corporate Restructuring
Bridge loans/Borrowed Funds/
Depository receipts
WACC
*
Return on Capital Employed ,
Return on Equity
Weighted Average Capital Cost
3
Financial / Portfolio Restructuring

2. 4/9/2015 2
•Internal accruals*
•IPO/FPO
•Rights issue
•PE Funds/ Private placement
•ADR /GDR / FCCB**
•Bank Loans – Long term & bridge
•Deferred credit
•External commercial borrowings
Promoter
& Promoter group
Acquirer company
(A)
Target company
(T)
Listed equity shares
Preference shares
Secured debt instruments
Cash
Bank guarantee
Debt borrowing funds (BF)
Equity investments method
Source of funds &
Methods of raising capital
Assets
Liabilities
Loans & Advances
Other business capital
aAa B
xXx Y
C
Z
SubsidiariesHolding
SubsidiariesHolding
Funds for Restructuring
Merger
LBO
(Leveraged Buyout)
Acquisition
(Control of management
Decisions)
#Professional
Management
Institution
Consolidation
Voting rights
Direct /proxy statements
Via Attorney
Investment
/Holding companyControlling interest > 75%
Direct
Indirect
Target (T)
company
Direct
Indirect
Target
company
(A)
Acquirer
OPENOFFER::MANAGERTOOPENOFFER
Target
company
(A)
Acquirer
Transfer
from (T) to (A)
Company 1
Company 2
+ Entirely new
Company
Target
company
(A)
Acquirer
JOINT VENTURE
SEBI Registered
Merchant Banker
AMALGAMATION
(A)
Acquirer
Entirely new
Company
Shareholders (T) or (A)
(Institutional / others)
* For domestic acquisitions only
** For International acquisitions only # External to the organization , $ Management buyout
Buy /Sell
… Continued
SPV
(Special purpose vehicle)
Establishes
Borrowed
Funds (BF)
+
Indirect
$MBO
Stock Exchange
Registered with SEBI
Gets delisted if listed
but legal
status of (T) prevails
BEFORE AFTER
Target
company
Mezzanine
finance
De listed
Confirms
Utilizes the funds for Restructuring
before issuing open offer
Utilizes target company assets, portfolio
METHOD/S

3. 4/9/2015 3
OPENOFFER::MANAGERTOOPENOFFER
BUY BACK
1
2
3
Tender
• Book building
• Stock Exchange
Odd lots
PAYMENT METHOD
Free & General reserves
Securities premium account
Proceeds of the shares
– preferential or equity
Cash
Bank guarantee
• Resolution (General / Special /Board)
• *Public announcement (PA)
• Draft letter of offer
• Payment of the consideration
• Resolution (General / Special /Board)
• *Public announcement
• Draft letter of offer
• Payment of the consideration
(A)
Acquirer
Stock
Exchange
SEBI
Compliance officer
(T)
Target
company
Disclosure
Disclaimer clause
Transaction dates
& Buyback ratios
The Escrow Account & Status
EQUITY CAPITAL RECORD IN %
Minimum of 25% of equity capital
payment consideration
Balance of 10% equity capital
payment consideration
CONDITIONS
If the Buy Back Open Offer
is withdraw then
One third to Target company
management
One third to SEBI
investor protection fund
One third distributed to
shareholders of target company
FUNDS FOR BUYBACK
Commercial bank cash deposit
Bank guarantee
Deposit of approved securities
… Continued
Shareholders (T) or (A)
(Institutional / others)
Opened by (A)
ControlledbyManagertoopenoffer
English
/ Daily
newspaper
(T)
Shareholders
Final letter
Verified by the manager
SEBI / Stock Exchange Guidelines
to corporate operations
SEBI Registered
*Merchant banker
Realizationof
proceedsOfsaleofsecurities
BankchequeorDD
Validupto1month
afterclosureofoffer
Within 7 days after resolution
Date of resolution
Within 5 working days after PA
• Resolution (General / Special /Board)
• *Public announcement
• Draft letter of offer
• Payment of the consideration
Within 7 working days
after filing draft letter of offer
``
Verify the payment consideration
Status indicates the
Extent of restructuring
& operations
* Manage to open offer & makes the public announcement
Varies for different cases as below
1. Shares /voting rights in a negotiated “Block Deal”
2. Private placemen in market
3. Shares/Voting rights in preferential allotment
4. FCCB/DR (depository receipts)
Same as in
1