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Corporate restructuring strategic forms, financing methods
The document outlines various strategies and methods for corporate restructuring, focusing on capital structure, financing, and management decisions. It discusses disinvestment from non-core and unprofitable businesses, as well as options for raising capital such as IPOs, private placements, and loans. Additionally, it includes details on mergers, acquisitions, and compliance requirements for public offerings.
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Corporate restructuring strategic forms, financing methods
- 1. 4/9/2015 1 RESTRUCTURING Business capacityor 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 •Rightsissue •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