Corporate Restructuring

         Session 1




        Abhimanyu
        August 30, 2009
What Is Corporate Restructuring?
           • Identify the best option for restructuring a company
             faced with...
Essence Of Corporate Restructuring
           The principal purpose of any restructuring
           exercise is to achieve...
Fulfilling Corporate Objectives

          Why Restructure?
Corporate Objectives
           • Generic Objective
                   – Maximize long-term shareholder value
           •...
Corporate Objectives (Contd.)
           • Business-Unit Objectives
                   –   Increase Revenue / Reduce Costs...
Corporate Objectives (Contd.)
           • Grassroots Level Objectives
                   –   Increase repeat orders
     ...
Stakeholder Considerations

        Why Restructure?
Ownership Theories


           Shareholder Theory vs.
           Stakeholder Theory
           The US Experience
        ...
RIL: Vision in 1980-81

           “...the Company a multi-product and
           well diversified Company resulting in a
...
RIL: Vision in 1997-98
           “In the light of anticipated robust growth in the
           Indian economy, and our ear...
ONGC: Vision Statement


           To be a world-class Oil and Gas
           Company integrated in energy
           bus...
IOC: Vision Statement


           A major diversified, transnational,
           integrated energy company, with
        ...
BP-AMOCO: Vision


           To create long-term shareholder value
           from a distinctive set of investment
      ...
BP-AMOCO: Mission
           We currently expect to pursue that objective by:
             – Maintaining proforma return o...
Agency Costs

           • Separation of ‘ownership’ and ‘control’
           • Professional managers have enormous
      ...
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Crest Aug30 Sesssion 1

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Crest Aug30 Sesssion 1

  1. 1. Corporate Restructuring Session 1 Abhimanyu August 30, 2009
  2. 2. What Is Corporate Restructuring? • Identify the best option for restructuring a company faced with a particular problem, challenge, or opportunity; • Use financial valuation and credit analysis to measure the potential value gains available through restructuring; • Manage the complicated accounting, tax, legal, and regulatory challenges that stand in the way of a restructuring; • Design an optimal negotiation strategy for dealing with the firm's stakeholders to ensure the ultimate success of a restructuring; and • Execute decisively a restructuring plan. August 30, 2009 Corporate Restructuring | Session 1 2
  3. 3. Essence Of Corporate Restructuring The principal purpose of any restructuring exercise is to achieve corporate objectives and unlock value. Three essential steps in corporate restructuring: – Internal Restructuring – External Restructuring. – Making managers owners. August 30, 2009 Corporate Restructuring | Session 1 3
  4. 4. Fulfilling Corporate Objectives Why Restructure?
  5. 5. Corporate Objectives • Generic Objective – Maximize long-term shareholder value • Tactical Objectives – Improve Margin – Satisfy customers – Utilize capital effectively – Raise funds economically – Promote knowledge management – Design effective compensation plan – Divestment/ expansion/acquisition decisions – Meet other social obligations August 30, 2009 Corporate Restructuring | Session 1 5
  6. 6. Corporate Objectives (Contd.) • Business-Unit Objectives – Increase Revenue / Reduce Costs – Monitor Product quality – Better customer support service – Better asset utilization – Effective utilization of internal accruals – External borrowing at lower cost – Nurture intellectual capital – Executive compensation plan tuned to Level 1 objective – Proper invoicing – Business ethics August 30, 2009 Corporate Restructuring | Session 1 6
  7. 7. Corporate Objectives (Contd.) • Grassroots Level Objectives – Increase repeat orders – Improve realization per visit – Increase sales per employee – Better capacity utilization. – Reduce variable costs through better operational yield – Variance analysis – Respond to customer queries immediately – Provide value added service – Accounts receivable and payable terms and timing – Check pollution emission level – Facilitate site inspection by authorities August 30, 2009 Corporate Restructuring | Session 1 7
  8. 8. Stakeholder Considerations Why Restructure?
  9. 9. Ownership Theories Shareholder Theory vs. Stakeholder Theory The US Experience The Japanese Experience August 30, 2009 Corporate Restructuring | Session 1 9
  10. 10. RIL: Vision in 1980-81 “...the Company a multi-product and well diversified Company resulting in a complete change in the face of the Company and imparting a future improvement to the net worth of equity.” August 30, 2009 Corporate Restructuring | Session 1 10
  11. 11. RIL: Vision in 1997-98 “In the light of anticipated robust growth in the Indian economy, and our earnings growth forecast, we will endeavour to double the value of Reliance in the next five years. We plan to achieve this goal through focused growth, capital efficiency and a single minded emphasis on shareholder value.” “We have set ourselves the targets of achieving a 20% compounded growth in earnings per share and a return of 20% on shareholders’ funds over the next 5 years.” August 30, 2009 Corporate Restructuring | Session 1 11
  12. 12. ONGC: Vision Statement To be a world-class Oil and Gas Company integrated in energy business with dominant Indian leadership and global presence. August 30, 2009 Corporate Restructuring | Session 1 12
  13. 13. IOC: Vision Statement A major diversified, transnational, integrated energy company, with national leadership and a strong environment conscience, playing a national role in oil security and public distribution. August 30, 2009 Corporate Restructuring | Session 1 13
  14. 14. BP-AMOCO: Vision To create long-term shareholder value from a distinctive set of investment opportunities, which are: – biased towards the upstream – capable of producing returns which are both secure and highly competitive over the long-term August 30, 2009 Corporate Restructuring | Session 1 14
  15. 15. BP-AMOCO: Mission We currently expect to pursue that objective by: – Maintaining proforma return on capital employed (ROCE) at least broadly flat between 2003 – 2005 – Disciplined long-term investment growth – Maintaining proforma gearing in the range of 25 - 35% – Strategic management of costs: • best-in-class operating costs (e.g. field or site specific costs) • value/benefit driven revenue investment (e.g. advertising, technology costs) • fit-for-purpose and efficient levels of overhead cost August 30, 2009 Corporate Restructuring | Session 1 15
  16. 16. Agency Costs • Separation of ‘ownership’ and ‘control’ • Professional managers have enormous powers • How do you ensure that the power is not misused? • What about business ethics vis-à-vis maximization of profits? August 30, 2009 Corporate Restructuring | Session 1 16

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