This document discusses corporate restructuring strategies. It begins by covering the different types of restructuring strategies like mergers, acquisitions, takeovers, demergers, and financial restructuring. It then discusses the need for corporate restructuring to increase efficiency and market share. The document also provides context on the regulatory framework and historical background of corporate restructuring in India. It emphasizes that strategic planning and identifying core competencies are important aspects of successfully implementing a corporate restructuring strategy.

1. Corporate Restructuring
Ramadevi R. Iyer
1

2. Coverage
• Introduction and
Strategies
• Mergers and
Amalgamations
• Takeovers
• Funding of Mergers and
Takeovers
• Valuation of shares,
business and brands
• Demergers and Reverse
Mergers
• Post merger
reorganisation
• Financial restructuring
• Case studies
• Legal documentation - 70
marks
• Revival and restructuring
of sick companies
• Securitisation and debt
recovery
• Winding up
• Cross-border insolvency
2

3. CR
• To give a new structure to, rebuild or
rearrange
• Rearranging the business for increased
efficiency and profitability
• Essentials - efficient and competitive business
operations by increasing the market share,
brand power and synergies
• Can be organic or inorganic
3

4. Historical Background
• India – highly regulated upto 1991
• Industrial policy 1991
• Licensing reduced and liberalisation begins
• MRTP amended
• M & A became very prominent
• Taking advantage of opportunities and
meeting the challenges of competition
4

5. Present Scenario
• WTO
• Restructuring wave
• Mergers, amalgamations, takeovers,
acquisitions and consolidation
• Various reasons
• Simple – cost-benefit analysis
• Conglomerates – combinations
• Business convenience
5

6. Global Scenario
• Consumer has many choices
• Technological advancements high
• Heavy focus on quality, range, cost and
reliability of products and services
• Turbulence – strategy
• Achieve and sustain superior performance
• UK most important investor in US
• Cross-country investments acceptable
6

7. National Scenario
• Tata – Corus
• Arcelor – Mittal
• Betapharm – Dr. Reddy
• Hindalco – Novelis
• Internationally presence is felt
• Costs lower, innovate speedily and increase
international presence
7

8. Need of CR
• Arrange business activities – predetermined
objectives
– Redirection of firms activities
– Deploy surplus cash from one business to finance
profitable growth in another
– Exploit inter-dependence among present or
prospective businesses
– Risk reduction
– Development of core competencies
8

9. Scope of CR
• Enhances economy
• Improves efficiency – profitability
• Focus on its competitive
advantage, operational synergy, efficient
allocation of managerial capabilities
• Consolidation
• Revival and rehab of sick unit
• Acquiring constant supply of RM
9

10. Regulatory Framework
• 1. The Companies Act, 1956
• 2. Companies (Court) Rules, 1959
• 3. Income Tax Act, 1961
• 4. Listing Agreement
• 5. The Indian Stamp Act 1899
• 6. SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations 2011
10

11. Important aspects of CR
• Legal and procedural aspects
• Taxation Aspects
• Stamp duty aspects
• Economic aspects
• Valuation aspects
• Accounting aspects
• Due diligence aspects
• Competition aspects etc.
• Human and Cultural aspects
11

12. Kinds of CR
• Financial
• Technological
• Market
• Organisational
• Common tools –
Amalgamation, merger, demerger, slump
sale, acquisition, JV, disinvestment, Strategic
alliances and franchises
12

13. Cross Border Acquisitions
• UK in US
• Daimler Benz-Chrysler; BP – Amoco etc.
• Motivation:
– Growth orientation
– Access to inputs
– Exploit unique advantages
– Defensive
– Response to client needs
– Opportunism
13

14. Strategies – Chapter II
• Strategos – military
• General Manager
• Plan or course of action – vital importance
• Approach – flexible – achieve desired results
• Long-term or medium term
• Tactic
• Solving routine or non-routine
• Henry Mintzberg – 5Ps –
Plan, ploy, pattern, position, perspective
14

15. Introduction
• Why strategies?
– Better decisions
– Increased energy
– Increased capacity
– Improved customer satisfaction
– Competitive Advantage
– Better solutions
– Market recognition
– Greatly enhances the chance of success
15

16. Levels of strategies
• Corporate Level
• Divisional or business
• Functional
16

17. Strategic Planning
• Business environment – uncertain
• Different growth strategies for different
organisations
• Objectives
• Management tool – assess and adjust direction to
environment
• Constant change
• Requires sustained commitment, complexity and
ability to harness strategic opposites
17

18. Formulation and Execution of CR
Strategies
• Environmental Assessment – Internal and
external
• Vision and mission
• Objectives and procedures
• Strategic setting
• SWOT for internal
• Many stages – analysis for all types of
competitive forces and factors, planning,
budgeting, review and correction; risk
management 18

19. • Importance
– Why planning with strategy
– Planning required for survival
– Provides purpose and direction
– Thought out
– Great execution
– Communicate
– Benefits – better decisions, increased
energy, capacity, improved customer
satisfaction, competitive advantage, better
solutions, market recognition, enhances chances of
success
19

20. • Features
– Participation of responsible persons at different
levels
– Key ingredient of effective management
– Prepares the firm for facing and shaping future
– Based on quality data
– Draws from intuition and logic
– Avoid haphazard response
– Optimum leveraging of firm’s resources
20

21. ….. Strategic planning and
long-range planning
Strategic
• Dynamic environment
• Objective is fixed method
may be varied
• Vision and mission based
and formed by
discussion, formal
techniques or otherwise
and from individual
inspiration
Long-range
• Assumed fixed environment
• Objective fixed and method
to achieve is planned
• Formulation is based on
fixed methods
21

22. …..Strategic Management
• Strategy is a plan or course of action which is
of vital, pervasive or continuing importance to
the organisation as a whole.
• Management is defined as the conducting or
supervising of something (as a business)
especially the executive function of planning,
organising, directing, controlling and
supervising any industrial or business project
or activity with, responsibility for results
22

23. ….
• (i) matching business requirements with
internal capabilities,
• (ii) having strategically balanced portfolio,
• (iii)achieving and sustaining competitiveness,
and
• (iv)developing long-term internal and core
competencies
23

24. Competitive Advantage and
core competencies
• Competitive advantage – ownership of valuable
resources
• Abandon – no competitive advantage
• Core competency – resource based perspective
on corporate strategy
• Bundle of specific knowledge, skills, technologies,
capabilities and organisation which enables it to
create value in a market that other competitors
cannot do in the short term
24

25. Identifying core competency
• Potential access to a wide variety of markets
• Significant contribution to perceived customer
benefits of end product
• Difficult for competitors to imitate
25

26. Method of Implementation of
Strategies
• Optimum business portfolio
• Decide whether to retain, divest or diversify
• Amalgamation – 2 Cos forming new
• Merger – 2 Cos fusing into existing one
• Acquisition – one acquiring most of the shares
of the other
• Takeover – complete acquisition
• Disinvestment – PSU
26

27. • SA – agreement to co-operate in order to
achieve certain objectives
• Demerger
• JV
• Slump sale – company sells whole or
substantially the whole of the undertaking for
a predetermined lump sum
• Franchising
27