Corporate Restructuring - MFM

8/7/2019 Corporate Restructuring - MFM

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CORPORATECORPORATE

RESTRUCTURINGRESTRUCTURING

MFM MFM II Year ( II Year (Sem Sem II) II)


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Corporate RestructuringCorporate Restructuring

Actions taken to expand or contract

a firms basic operations or fundamentally change its assets or financial structure or ownership

structure are referred to as corporaterestructuring .


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Corporate RestructuringCorporate Restructuring

E xpand a firms basic operations

Contract a firms basic operations

Change its assets

Change its financial structure or ownership structure


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Need For Corporate RestructuringNeed For Corporate Restructuring1 .Organic V/s. Inorganic Growth2.Corporate E xpansion and Profitable Growth3. E nhancement in Production

4. E nhancement in Marketing and Market Share5.Maintain their Competitive E dge6. E conomics of scale

7.Cross Selling8.Synergy9.Tax benefits10 .Diversification


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1 . Mergers2. Acquisition

3. Amalgamation4. Takeovers5. Demergers

6. Leverage Buy Out

Forms of Corporate RestructuringForms of Corporate Restructuring

7. Spin-Offs8. Financial Restructuring

9. Buy-Back of Shares10 .Capital Reorganization11 .Sale of Business Units and

Assets


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M eaning Of M ergerM eaning Of M erger

1 . A merger is a Combination of Two Companies into OneLarger Company.

2. In a merger, the corporations come together to combineand share their resources to achieve common objectives.

3. Such actions are commonly voluntary and involve stock swap or cash payment to the target.

4. The shareholders of the combining firms often remainas joint owners of the combined entity.


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M eaning Of AcquisitionM eaning Of Acquisition

1 . In Acquisition one firm purchases the assets or shares of another, and with the acquired firms shareholders

ceasing to be owners of that firm.2. An acquisition, also known as a takeover, is the buying

of one company (the target) by another.

3. An acquisition may be friendly or hostile.4. Acquisition usually refers to a purchase of a smaller

firm by a larger one.


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Forms Of M ergersForms Of M ergers1 . Horizontal Mergers (An example of this is the

alliance between Birla, At&T and TATA (BATATA)in the Indian telecom sector.)

2. Vertical Mergers For example, Nirma's bid for Gujarat Heavy Chemicals (backward integration) or Hindalco bidding for Pennar Aluminums (forward

integration).3. Conglomerate Mergers


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Economic Advantages of M ergersEconomic Advantages of M ergers

1 . Faster growth2. E conomies of scale

3. Synergy effect4. Access to capital and brand5. Gaining complementary strengths

6. Acquisition of new customers7. E nhancement of skill sets8. E xpansion into new areas (Diversification)9. Tax Benefits


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Process of M erger and AcquisitionProcess of M erger and Acquisition1 . Search for a Merger Partner

2. Beginning Discussions

3. Due Diligence Process4. Negotiations

5. Declaration Of Intent

6. E xploration Of Issues & Alternatives

7. Preparation Of A Merger Plan

8. E xecuting The Merger


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D etermining the Firms ValueD etermining the Firms Value1 . Book Value

2. Appraisal Value

3. Market Value4. E arning Per Share

5. Free Cash Flows to the Firm


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Financing Techniques in M ergersFinancing Techniques in M ergers1 . Ordinary Share Financing

2. Debt and Preference Shares Financing

3. Deferred Payment Plan4. Tender Offer


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REASONS FOR FAILURESREASONS FOR FAILURES1 . Size Issues

2. Diversification

3. Unwieldy and Inefficient4. Poor Organization Fit

5. Poor Strategic Fit

6. Poor Cultural Fit

7. Paying Too Much (Over paying)

8. Incomplete and Inadequate Due Diligence


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CONTINUECONTINUE1 . Limited Focus2. Failure to E xamine the Financial Position

3. Failure to E valuate the Target Company Condition in

Detail4. Lack of Proper Communication

5. Failure to Take Immediate Control

6. Failure of Top Management to Follow Up

7. Post Merger Management

8. Other Causes


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ALTERNATIVEALTERNATIVESTRATEGIESSTRATEGIES


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STRATEGIC ALLIANCESSTRATEGIC ALLIANCES

It is an arrangement or agreement under which two or more firms co-operate inorder to achieve certain commercialobjectives. The strategic alliances take avariety of forms, from simple agreements

between firms to buy or sell each othersgoods, to the creation of separate andlegally distinct entities.


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TYPES OF ALLIANCESTYPES OF ALLIANCES1 . Supply or purchase agreement

2. Marketing or distribution agreement

3. Agreement to provide technical services

4. Management contract

5. Licensing of know-how, technology, design or patent

6. Franchising

7. Joint venture


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CONCLUSIONCONCLUSION1 . M&A as usual is no longer an adequate strategy for

business to achieve rapid growth.

2.If M&A fail to live up to their expectations and

objectives, then companies need to explorealternative means of achieving the same objectives.

3. Thus, the companies can go for Strategic Alliances.

Wh et h er it is M&A or any kind of corporate strategy,it s h ould create s h are h olders wealt h , create a good

working environment for employees and last but not t h e least it s h ould be favorable for t h e society

at large.


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THANK YOUTHANK YOU

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Corporate Restructuring - MFM