Corporate restructuring is a strategic response to increased competition, technological advancements, emerging markets, and demographic changes, defined as significant changes in business capacity, capital structure, or ownership. Examples of corporate restructuring include mergers like Vodafone and Idea Cellular, and acquisitions such as Reliance Jio's purchase of Radisys. Activities not classified as corporate restructuring encompass organizational changes like reengineering, downsizing, and business process changes.

1. Chapter 1
Corporate Restructuring

2. CHAPTER
1
Why Corporate Restructuring?
 Increased Competition
Advent of a new and more efficient technology
Emergence of new markets
Emergence of new classes of consumers
Demographic changes
Business cycles
‘Wise organizations undertake changes to
increase their cutting edge over the competitors
and enhance their leadership position.’

3. Increased Competition
• Flipkart and Myntra (2014): To better compete with Amazon in the Indian e-
commerce market, Flipkart acquired Myntra, a leading online fashion retailer.
• Vodafone and Idea Cellular (2018): In response to intense competition in the telecom
sector, particularly after the entry of Reliance Jio, Vodafone India merged with Idea
Cellular to form Vodafone Idea Limited.
Advent of a New and More Efficient Technology
• Reliance Jio and Radisys (2018): Reliance Jio acquired Radisys, a US-based
telecommunications solutions provider, to enhance its technology capabilities and
support the development of new 5G and IoT technologies.
• HCL Technologies and IBM Products (2018): HCL Technologies acquired select IBM
software products to leverage new and more efficient technologies in their software
services offerings.
Emergence of New Markets
• OYO Rooms and Leisure Group (2019): OYO acquired the Amsterdam-based @Leisure
Group, marking its entry into the European vacation rental market and expanding its
global footprint.
• Tata Motors and Jaguar Land Rover (2008): Tata Motors acquired the British luxury
car brands Jaguar and Land Rover to enter the high-end automobile market and
expand its presence in global markets.

4. Emergence of New Classes of Consumers
• Zomato and Uber Eats India (2020): Zomato acquired Uber Eats India to
cater to a broader class of consumers seeking food delivery services and to
strengthen its market position.
• Byju's and WhiteHat Jr (2020): Byju's acquired WhiteHat Jr to tap into the
growing demand for online coding classes among young learners and to
diversify its educational offerings.
Demographic Changes
• HDFC Bank and Centurion Bank of Punjab (2008): HDFC Bank merged with
Centurion Bank of Punjab to expand its reach in regions with a growing
population and increasing banking needs.
• Future Group and Bharti Retail (2015): The merger between Future Group
and Bharti Retail aimed to capitalize on India's growing middle-class
population and rising demand for organized retail.
Business Cycles
• SBI and its Associate Banks (2017): State Bank of India merged with its five
associate banks to create a more resilient and competitive banking entity,
capable of better navigating business cycles.
• ICICI Bank and Bank of Rajasthan (2010): ICICI Bank acquired Bank of
Rajasthan to strengthen its position and improve stability during economic
fluctuations.

5. Why Corporate Restructuring?
However, not all the changes that a company undergoes would qualify
to be termed as ‘ corporate restructuring’.

6. Corporate Restructuring
Definition
Corporate restructuring can be defined as any change in the business
capacity or portfolio that is carried out by an inorganic route
or
Any change in the capital structure of a company that is not a part of
its ordinary course of business
or
Any change in the ownership of or control over the management of the
company or a combination of any two or all of the above

7. Corporate Restructuring
I. (a) Any change in the business capacity or portfolio carried out by
inorganic route
 Tata Motors launched Sumo and later, Indica- leading to an expansion of its
business portfolio. However, these products were launched from Tata Motor’s own
manufacturing capacity in through an organic route. Hence, it would not qualify as
‘corporate restructuring’
 Tata Motors’ acquisition of Jaguar Land Rover from Ford, through Jaguar Land
Rover Limited is ‘corporate restructuring’
 Grasim’s acquisition of Larsen & Toubro’s (L&T) cement division through UltraTech
Cement Limited is an example of ‘corporate restructuring’
(b) Change in the business portfolio could also be in the
nature of reduction of business handled by a company
 In the case of Grasim and L&T, the demerger of L&T’s cement business into
UltraTech Cement Limited was reduction of its business portfolio and thus,
amounted to ‘corporate restructuring’ of L&T.

8. Corporate Restructuring
II. Any change in the capital structure of a company that is not in the
ordinary course of its business
 Capital structure refers to debt equity ratio, i.e. the proportion of debt and equity
in the total capital of a company.
 This capital structure is never static and changes almost daily.
 Within a targeted or planned range if the debt/equity ratio fluctuates, such
changes in the capital structure do not amount to ‘capital restructuring’.
 Borrowing of a significant amount of term loan or an issue of five year non-
convertible debenture do not qualify to be called ‘corporate restructuring’ .
 An initial public issue, or a follow-on public issue or buy-back of equity shares
would permanently alter the capital structure of a company, and thus, would
amount to ‘corporate restructuring’.

9. Corporate Restructuring
III. Any change in the ownership of a company or control over its
management
a) Merger of two or more companies belonging to different promoters
b) Demerger of a company into two or more with control of the resulting
company passing on to other promoters
c) Acquisition of a company
d) Sell-off of a company or its substantial assets
e) Delisting of a company
 All these would qualify to be called exercises in ‘corporate restructuring’.

10. The Activities or Changes which are not termed ‘Corporate
Restructuring’
I. Initial creation of a corporate structure
 Its various examples are:
• Incorporation of a limited company
• Conversion of a proprietary concern into a company
• Conversion of a partnership firm into a company
• Conversion of a private company into a public company
II. Change in the internal command structure or hierarchy
 The command structure of an organization or its hierarchy simply means the reporting
relationships among the employees, managers, top management and their various functions.
• Functional organization
• Divisional organization
• Matrix organization
Continued…

11. The Activities or Changes Which are
Not Termed ‘Corporate Restructuring’
 With businesses having become more complex along with the acceptance of
newer concepts of organization building such as tutorship, mentorship, etc.,
the hierarchies have stopped strictly falling into one of the three types
mentioned in the earlier slide.
 Any migration of an organization from functional to divisional or to matrix
type or to any new or hybrid type or vice-versa would not be a case of ‘
corporate restructuring’.
III. Change in the business process
This is also called ‘reengineering’. ‘Reengineering, properly, is the
fundamental rethinking and redesign of business processes to achieve
dramatic improvement in critical, contemporary measures of performance,
such as cost, quality, service and speed.’
It refers to the radical redesigning of business processes and not to the
ownership and control or to the capital structure of the organization.
Reengineering is also outside the ambit of ‘corporate restructuring’.

12. The Activities or Changes which are
not termed ‘Corporate Restructuring’
IV. Downsizing
It is another form of organizational change in which the business organization
substantially cuts down on its manpower, recurring cost and/or capital
expenditure, either as an objective itself or as a result of reengineering.
Downsizing is also outside the purview of ‘corporate restructuring’.
V. Other activities
Activities such as outsourcing, enterprise resource planning, total quality
management, franchising alliances, networking alliances and licensing do not
classify as corporate restructuring activities.

13. Major Forms of Corporate Restructuring
 Merger
 Consolidation
 Acquisition
 Divestiture
 Demerger (spin off/split up/split off)
 Carve Out
 Joint Venture
 Reduction of Capital
 Buy-back of Securities
 Delisting of Securities/Company
 Corporate Debt Restructuring