- Understand the motives for corporate restructuring, different types of restructuring including: mergers & acquisitions, leveraged buyouts, and divestitures.
- Valuing the corporate restructuring process.
- Case Study: Exxon-Mobil merger
The Concept
A stable strategy arises out of a basic perception by the management that the firm should concentrate on using its present resources for developing its competitive strength in particular market areas.
In simple words, stability strategy refers to the company’s policy of continuing the same business and with the same objectives
A firm pursues stability strategy when
1. It continues to serve the public in the same product or service, market, and function sectors as defined in its business definition.
2. Its main strategic decisions focus on incremental improvement of functional performance.
2. Corporate Restructuring is the process of redesigning one or more aspects of a company.
3. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, surviving a currently adverse economic climate, or acting on the self confidence of the corporation to move in an entirely new direction.
Corporate Restructuring, Aims of Corporate Restructuring, Need for Corporate Restructuring, Forms of Corporate Restructuring, Restructuring on the Basis of Expansion, Restructuring on the Basis of Contraction, Restructuring on the Basis of Changes in Ownership, Corporate Renewal, Causes of Corporate Renewal, Techniques of Corporate Renewal, Strategic Alliance, Advantages of Strategic Alliance, Limitations of Strategic Alliance, Types of Strategic Alliance, Public Private Partnership (PPP), Importance of PPP, Problems Associated with PPP, Governing Strategies of PPP Model, PPP in India, Advantages of IT Driven Strategies, Limitations of IT Driven Strategies, Contribution of IT Sector in India
The Concept
A stable strategy arises out of a basic perception by the management that the firm should concentrate on using its present resources for developing its competitive strength in particular market areas.
In simple words, stability strategy refers to the company’s policy of continuing the same business and with the same objectives
A firm pursues stability strategy when
1. It continues to serve the public in the same product or service, market, and function sectors as defined in its business definition.
2. Its main strategic decisions focus on incremental improvement of functional performance.
2. Corporate Restructuring is the process of redesigning one or more aspects of a company.
3. The process of reorganizing a company may be implemented due to a number of different factors, such as positioning the company to be more competitive, surviving a currently adverse economic climate, or acting on the self confidence of the corporation to move in an entirely new direction.
Corporate Restructuring, Aims of Corporate Restructuring, Need for Corporate Restructuring, Forms of Corporate Restructuring, Restructuring on the Basis of Expansion, Restructuring on the Basis of Contraction, Restructuring on the Basis of Changes in Ownership, Corporate Renewal, Causes of Corporate Renewal, Techniques of Corporate Renewal, Strategic Alliance, Advantages of Strategic Alliance, Limitations of Strategic Alliance, Types of Strategic Alliance, Public Private Partnership (PPP), Importance of PPP, Problems Associated with PPP, Governing Strategies of PPP Model, PPP in India, Advantages of IT Driven Strategies, Limitations of IT Driven Strategies, Contribution of IT Sector in India
This presentation is an overview of Capital Structure Theories.
Dr. Soheli Ghose ( Ph.D (University of Calcutta), M.Phil, M.Com, M.B.A., NET (JRF), B. Ed).
Assistant Professor, Department of Commerce,St. Xavier's College, Kolkata.
Guest Faculty, M.B.A. Finance, University of Calcutta, Kolkata
Merger and Acquisition ppt - SlideShareJanvhi Sahni
International Business Management (IBM) - BBA & MBA NOTES / POWER POINT PRESENTATION.... This ppt will tell you about the merging and takeover companies in India along with various examples. Presented By: Janvhi
This presentation enumerates the practical aspects of merger, demerger and reduction of capital and the strategies involved therein. It also highlights certain key issues involved in corporate restructuring.
This ppt deals with introduction to mergers and acquisition with relevant examples from industry. It also tells pros and cons of mergers and acquisitions.
This presentation is an overview of Capital Structure Theories.
Dr. Soheli Ghose ( Ph.D (University of Calcutta), M.Phil, M.Com, M.B.A., NET (JRF), B. Ed).
Assistant Professor, Department of Commerce,St. Xavier's College, Kolkata.
Guest Faculty, M.B.A. Finance, University of Calcutta, Kolkata
Merger and Acquisition ppt - SlideShareJanvhi Sahni
International Business Management (IBM) - BBA & MBA NOTES / POWER POINT PRESENTATION.... This ppt will tell you about the merging and takeover companies in India along with various examples. Presented By: Janvhi
This presentation enumerates the practical aspects of merger, demerger and reduction of capital and the strategies involved therein. It also highlights certain key issues involved in corporate restructuring.
This ppt deals with introduction to mergers and acquisition with relevant examples from industry. It also tells pros and cons of mergers and acquisitions.
HOW CAN YOU LEARN WHAT STRATEGIES ARE USED BY MARKETIERS? THIS ONE EXPLAINS ALL BUSSINESS STRATEGIES USED IN MARKETING.WHAT IS THE NATURE OF LONG TERM STRATEGIES? HOW EXPEIENCED SEE IT? WHAT ARE MARKETING MANAGERS LOOKING FOR?
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.
Joint ventures international expansion strategies - corporate level strategiesmanumelwin
An equity joint venture is a contractual, strategic partnership between two or more separate business entities to pursue a business opportunity together.
A Study on the Importance of Corporate Restructuring Approaches in MalaysiaValerie Sinti
No one can deny the importance of change management. Most corporate bodies that endure over an extended period need to adapt to changing circumstances. During recent financial crisis, such changes were sudden and completely unexpected. Even when changes are ongoing many organizations frequently fail to recognize them and to make the necessary changes in good time. It is these failures that lead for the need of corporate restructuring.
This presentation enumerates the practical aspects of merger, demerger and reduction of capital and the strategies involved therein. It also highlights certain key issues involved in corporate restructuring.
The joint working session of the Banking and of the Insolvency Committees on “The Funding of Insolvency” highlighted the worldwide convergence in what is now a distinctive sector of the financing industry.
Dr Shinjiro Takagi, of MORGAN LEWIS & BOCKIUS first provided a multijurisdictional update on the development of pre-insolvency remedies and the worldwide convergence for the preference of the maintenance of the insolvent but otherwise economically sound business as an on-going entity as a means of improving the outcome for all stakeholders. This requires funding and incentives for funders by way of new money privilege.
Mr Oliver Gayner, of IMF BENTHAMS presented third party litigation funding, particularly for insolvent businesses, which has now spread worldwide and gained recognition in arbitration proceedings.
Mr Chul Man Kim, of YULCHON, presented the very recent changes to rehabilitation procedures in Korea, reflecting the convergence of legal systems around the techniques of Debtor In Possession funding as well as the promotion of prepackaged solutions by governments and legislators.
Isabelle Smith Monnerville, of SMITH D’ORIA, closed the session with a presentation of non-bank funding for insolvent businesses in particular by customers (continuation agreements) or creditors (debt-equity swaps) which are also found in many jurisdictions.
Financial restructuring is a specialist initiative undertaken to reorganize the financial assets and liabilities of a business enterprise in order to make the most beneficial environment for that entity. Primarily, it comprises of reorganizing share capital and debt.
Legal aspects of mergers and acquisition
Acquisition is the combination of two companies where one corporation is completely absorbed by another corporation. The less important company loses its identity and becomes part of the more important corporation, which retains its identity. It may involve absorption or consolidation.
Merger is also defined as amalgamation. Merger is the fusion of two or more existing companies. All assets, liabilities and the stock of one company stand transferred to Transferee Company in consideration of payment in the form of:
I) Equity shares in the transferee company,
II) Debentures in the transferee company,
III) Cash, or
IV) A mix of the above mode
This presentation discusses:
1. Background on Artificial Intelligence (AI)
2. How is reshaping Human Resources practices and processes, with emphasis on talent acquisition and learning & development.
3. New skills that HR professionals need in this new ERA
- Understand the mobile industry trends, market structure, cost drivers, pricing models, and the evolution of subscriber base and revenues.
- Case study: Vodafone Egypt
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Currently pi network is not tradable on binance or any other exchange because we are still in the enclosed mainnet.
Right now the only way to sell pi coins is by trading with a verified merchant.
What is a pi merchant?
A pi merchant is someone verified by pi network team and allowed to barter pi coins for goods and services.
Since pi network is not doing any pre-sale The only way exchanges like binance/huobi or crypto whales can get pi is by buying from miners. And a merchant stands in between the exchanges and the miners.
I will leave the telegram contact of my personal pi merchant. I and my friends has traded more than 6000pi coins successfully
Tele-gram
@Pi_vendor_247
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
If you are looking for a pi coin investor. Then look no further because I have the right one he is a pi vendor (he buy and resell to whales in China). I met him on a crypto conference and ever since I and my friends have sold more than 10k pi coins to him And he bought all and still want more. I will drop his telegram handle below just send him a message.
@Pi_vendor_247
3. 08/11/14 Corporate Finance Project 3
• any substantial change in a company’s business portfolio or financial
structure in a way that helps the firm to achieve its objectives and
increases the value to shareholders
• Classification:
–
Portfolio Restructuring
–
Financial Restructuring
–
Organizational Restructuring
What Is Corporate Restructuring?
Introduction
Why Companies Undertake Restructuring Practices?
• Regulatory and political change
• Technological change
• Financial change
• Management Ego
5. 08/11/14 Corporate Finance Project 5
Introduction
Impact Of Restructuring On Corporate Performance
• A study that covers some data from 5000 firms over the 1980s has
attempted to investigate restructuring impact on market & economic
performance.
• The study reveals that LBOs result in greatest performance
improvement
• Spin off has a high probability of improving performance, but likely to be
much more modest than LBO
• Aggressive M&A activities, yielded returns slightly below the returns
realized from no transactions
7. 08/11/14 Corporate Finance Project 7
Mergers Waves
Mergers & Acquisitions
Buyer Target Completion Date Value ($ billion)
Vodafone Air Touch Mannesmann 12-Apr-00 161
Pfizer Warner-Lambert 19-Jun-00 116
America Online Time Warner 11-Jan-01 106
Exxon Mobil 30-Nov-99 81
Glaxo Wellcome Smithkline Beecham 27-Dec-00 74
SBC Communications Ameritech 8-Oct-99 72
Vodafone Group Airtouch 30-Jun-99 69
Bell Atlantic GTE 30-May-00 60
Pfizer Pharmacia 16-Apr-03 60
Total Fina Elf Aquitaine 9-Feb-00 54
• 1800s • 1960s• 1920s • 1980s • Today
8. 08/11/14 Corporate Finance Project 8
Hostile Vs. Friendly Takeover
Mergers & Acquisitions
• Acquiring company identifies a possible target
• Acquiring firm’s managers decide how to approach the target firm:
• Friendly takeover: management of target firm accepts merger
• Hostile takeover: management of target firm does not accept
merger
• In friendly takeover, the target firm’s management recommends the
merger to its stockholders
• In hostile takeover, the acquiring firm makes a direct appeal to the
target firm’s stockholders
• In both cases, the stockholders are asked to tender their shares to a
designated financial institution that transfers ownership of the shares to
the acquiring firm
9. 08/11/14 Corporate Finance Project 9
• Market multiple analysis
• Corporate valuation model
Vop =
• Equity residual model
Vequity =
• Adjusted Present Value (APV)
Vop = ,
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Merger Analysis: Valuing The Target Firm
Mergers & Acquisitions
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WACC
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10. 08/11/14 Corporate Finance Project 10
Merger Analysis: Setting The Bid Price
Mergers & Acquisitions
• The ceiling price is the target firm’s post merger value as estimated
earlier
• The minimum price is the target firm’s pre-merger value of equity as an
independent operating company
• The gap between the post merger value and the value of equity
represents the synergistic benefits expected from the merger
• The actual price will be set somewhere in the gap, depending on many
factors
12. 08/11/14 Corporate Finance Project 12
Financial Reporting: Income Statement Effects
Mergers & Acquisitions
Post Merger Firm A
Firm A
(1)
Firm B
(2)
Merged
(3)
Sales 100 50 150
Operating Costs 72 36 109
EBIT 28 14 41
Interest (10%) 4 2 6
Taxable Income 24 12 35
Taxes 9.6 4.8 14
Net Income 14.4 7.2 21
EPS 2.4 2.4 2.33
13. 08/11/14 Corporate Finance Project 13
Divestiture
• Divestiture is the distribution of a company's assets or a
business segment by sale, liquidation or other acquisition
arrangement .
• Asset sale
– The sale of an entire division or unit.
• Spin-off
– Existing stockholders are given new stock representing
separate ownership rights in the division that was divested.
• Crave-out
– Minority interest in a corporate subsidiary is sold to new
shareholders .
• Liquidation
– Assets of a division are sold off piecemeal, rather than as an
operating entity.
14. 08/11/14 Corporate Finance Project 14
Reasons for Divestiture
• Dismantling segments which had higher values as independent
operations .
• Sale of original business due to changing opportunities.
• Divestiture to finance major acquisitions .
• Divestiture of unrelated divisions to focus on core businesses.
• Discarding unwanted businesses from prior acquisitions.
• Divestiture used as a takeover defence.
• Divestiture of low margin product lines to improve margins and
profitability .
15. 08/11/14 Corporate Finance Project 15
Examples of Divestitures
• PEPSI
– Spinning-off its fast-food business, which included Pizza
Hut, Taco Bell, and Kentucky fried chicken.
– To focus on its core business.
– Signing long-term contracts that ensure that Pepsi products
will be sold exclusively in each of the three spun-off chains.
• United Airlines
– Selling Hilton international hotels subsidiary and Hertz rental
car unit .
– To maintain the company’s focus in the highly competitive
airline industry .
16. 08/11/14 Corporate Finance Project 16
Financial Restructure
• Financial restructuring relates to improvements in the capital
structure of the firm. An example of financial restructuring would be
to add debt to lower the corporation's overall cost of capital.
• Leveraged Recapitalizations
– Additional debt to pay a large dividend or repurchasing shares .
• Dual-class recapitalization
– A second class of common stock that has limited voting rights in
the form of a higher dividend.
– Securing liquidity without sacrificing control.
• Exchange offers
– Giving one or more classes of claimholders the option to trade
their holdings for a different class of securities of the firm .
17. 08/11/14 Corporate Finance Project 17
Bankruptcy
• Bankruptcy is a legally declared inability or impairment of ability of
an individual or organization to pay their creditors.
• Financial distress:
– Temporary and permanent cash problem.
– Agreement with creditors to recover.
– Is the company “worth more dead than alive”?
– Should the firm file for protection under chapter 11 of the
bankruptcy.
– should it try to use informal procedures?
– Who should control the firm while it is being liquidated or
rehabilitated?
18. 08/11/14 Corporate Finance Project 18
Bankruptcy
• Informal reorganization
– For temporary financial difficulties.
– Workouts to restructure the firm the debt.
– Extension, creditors postpone the date of required interest or
principal payments.
– Composition, creditors voluntarily reduce their fixed claims on
the debtor or equity in exchange for debt.
– Simple, and also relatively inexpensive because legal and
administrative expenses are held at minimum.
– Result in the largest return to creditors.
19. 08/11/14 Corporate Finance Project 19
Bankruptcy
• Informal Liquidation
– Firm is more valuable dead than alive.
– Assignment, an informal procedure for liquidating a firm .
– An assignment calls for title to the debtor’s assets to be
transferred to a third party, known as an assignee.
– The assignee is instructed to liquidate the assets through a
private sale or public auction and then to distribute the proceeds
among the creditors on a pro rata basis.
– Assignments are feasible only if the firm is small.
20. 08/11/14 Corporate Finance Project 20
Bankruptcy
• Federal Bankruptcy
– Company to be filed for court protection under chapter 11.
– Attempting to reorganize under the supervision of a bankruptcy
court.
– Formal bankruptcy proceedings are designed to protect both the
firm and its creditors .
– Creditors can use bankruptcy procedures to stop the firms’
managers from continuing to operate & loose more money.
– A trustee will be appointed to take over the company.
– If no feasible reorganization can be worked out, the bankruptcy
judge will order that the firm be liquidated under procedures
spelled out in chapter 7 .
– Fraud and holdout problem.
21. 08/11/14 Corporate Finance Project 21
Bankruptcy
• Criticisms of Bankruptcy laws
– Large public corporations with the ability to hire high-priced legal
help can avoid, or at least delay, liquidation, often at the
expense of creditors and shareholders.
– Critics believe that bankruptcy is great especially for consultants,
lawyers, and investment bankers, who gain fees during
bankruptcy proceedings, and for managers, who continue to
collect their salaries and bonuses as long as the business is kept
alive.
– Companies operating under the protection of chapter 11 can
damage or even bankrupt their otherwise healthy competitors.
22. 08/11/14 Corporate Finance Project 22
Leveraged Buyouts (LBO)
• It is the takeover of a company, financed by borrowed funds.
• The investors group usually include current management.
• The target company's assets are used as security for the loans
acquired to finance the purchase.
• The acquiring company or group then repays the loans from the target
company's profits or by selling its assets.
• Generally the acquiring group plans to run the acquired company for a
number of years, boost its sales and profit, and then take it public
again as a stronger company.
23. 08/11/14 Corporate Finance Project 23
Leveraged Buyouts (LBO)
• In a LBO, there is usually a ratio of 90% debt to 10% equity.
• Due to this high debt/equity ratio, the bonds are usually not
investment grade and are referred to as junk bonds.
• Leveraged buyouts have had a notorious history, especially in the
1980's when several buyouts led to the eventual bankruptcy of an
acquired company.
• This was mainly due to the fact that the leverage ratio was nearly
100% and the interest payments were so large that the company's
operating cash flows were unable to meet the obligation.
• As of 2005, the largest LBO to date was the acquisition of RJR
Nabisco in 1989 by Kohlberg Kravis Roberts & Co. (KKR).
• Depending on the source cited, KKR paid between $25 billion
and $31 billion for the acquisition.
• LBOs activities increased from 99 transactions worth $3 billion in
1981 to peak 338 transactions worth over $61 billion in 1989.
25. 08/11/14 Corporate Finance Project 25
Valuing Corporate Restructuring
Process
We have Three methods for valuing the process
• Comparables Approaches
Comparable companies analysis
Comparable transactions analysis
• The DCF Spreadsheet Approach
• Formula Approach
26. 08/11/14 Corporate Finance Project 26
Summary of the valuation process
• All valuation methods have strengths and weaknesses
• Valuation uses historical data as starting point
• Valuation depends on forecasts
• Reliability of forecasts depends on
Analysis of changes in world and national economies.
Understanding of business economics and financial
characteristics of the industry
Analysis of competitive strategies and tactics.
• Ultimately valuation judgments must be made
Precision is not possible.
Valuations require periodic reassessments.
27. 08/11/14 Corporate Finance Project 27
Summary of the valuation process
• Role of valuation
Valuable planning framework for sound strategies and
improved efficiencies.
Valuable framework to help identify value drivers important
to the future value of the firm.
Sensitivity studies identify critical factors for the future.
Valuable as a tool to develop a business model with
effective information feedback system.
Valuable tool for flexible long range planning processes.
Critical in M&As — major cause of acquisition failure is that
bidder overpays .
28. 08/11/14 Corporate Finance Project 28
Industry Characteristics & Merger Motivations
Case Study: Exxon-Mobil Merger
• Impact of OPEC
• Oil price instability
• Early Restructuring Activities in the U.S. Oil industry
• The combined company would be in a stronger position to invest in
programs involving large outlays with high prospective risks and returns
• Exxon’s experience in deepwater exploration in West Africa would
combine with Mobil’s production and exploration acreage in Nigeria and
Equatorial Guinea
• Exxon’s strong presence in Azerbaijan would combine with Mobil’s
similar position in Kazakhstan
• Near term operating synergies of $2.8 billion were predicted. Two-thirds
of the benefits would come from eliminating duplicate facilities and
excess capacity
29. 08/11/14 Corporate Finance Project 29
Deal Terms & Event Returns
Case Study: Exxon-Mobil Merger
Exxon Mobil
Pre-Merger
Share Price $72.00 $75.25
Shares Outstanding (million) 2,431 780
Market Value (billion) $175.00 $58.70
Book Value (billion) $43.70 $19.00
P/E Ratio 23.60 17.90
Exchange Terms
Total Paid (billion) $74.20
Stock Exchanged 1.32 for 1
Premium Over Market (billion) $15.50
Premium Over Market % 26.40%
Premium Over Book (billion) $55.20
Premium Over Book % 290.50%
Post-Merger
Number of Shares 2,431 1,030
33. 08/11/14 Corporate Finance Project 33
Valuation Analysis
Case Study: Exxon-Mobil Merger
• Valuation Calculation
PV of cash flows, 2000-2010 $130,331
PV of terminal value $171,757
Marketable securities $73
Total value of the firm $302,161
Value of debt ($18,972)
Value of equity $283,189
Shares outstanding 3,477
Intrinsic share price $81.45
34. 08/11/14 Corporate Finance Project 34
Tests of Merger Performance
Case Study: Exxon-Mobil Merger
Market Caps Ownership
Pre merger
Exxon $175.00 74.90%
Mobil $58.70 25.10%
Total $233.70 100.00%
Post merger
Combined Value $283.30
Paid to Mobil $74.20
Remainder $209.10
Exxon Pre merger $175.00
Gain from Merger $34.10
Portion to Exxon 70% $23.90
Portion to Mobil 30% $10.20
Plus Premium to Mobil $15.50
Mobil Total Gain $25.70
35. 08/11/14 Corporate Finance Project 35
Anti-Trust Considerations
Case Study: Exxon-Mobil Merger
• Antitrust agencies place great emphasis on market concentration effects using
the Herfindahl-Hirschman Index (HHI or H index) Oil price instability
• The H index is measured by the sum of the squares of the market shares of all
of the firms in the industry
• The critical H index specified in the Guidelines is 1,000
• Below 1,000 concentration is considered sufficiently low, so that no further
investigation is required
• If a post-merger H index is between 1,000 and 1,800 and the index was
increased by 100 or more, the merger would be investigated
• If the industry H index is more than 1,800 and it was increased by at least 50,
the merger is likely to be challenged.
• With 9 mergers among the largest petroleum companies during 1998-2001, the
HHI for the petroleum industry rose from 389 points to 583 points