Corporate Restructuring

Introduction
• Corporate Restructuring is an expression that connotes a
restructuring process undertaken by the business enterprise. It is the
process of redesigning one or more aspects of a company.
• Hence, Corporate Restructuring is a comprehensive process by which
a company can consolidate its business operations and strengthen its
position to achieve its short-term and long-term corporate objectives.

Corporate restructuring is the process of significantly changing a company's business model, management
team or financial structure to address challenges and increase shareholder value. Corporate restructuring is an
inorganic growth strategy.
Financial restructuring
• Financial restructuring deals with restructuring of capital base and
raising finance for new projects. Financial restructuring helps a firm to
revive from the situation of financial distress without going into
liquidation. Financial restructuring is done for various business
reasons:
• Poor financial performance
• External competition
• Emerging market opportunities
• Erosion or loss of market share
• Market and Technological Restructuring
• Organisational Restructuring
• Organizational Restructuring involves establishing internal structures and
procedures for improving the capability of the personnel in the organization
to respond to changes. These changes need to have the cooperation of all
levels of employees. Some companies shift organizational structure to expand
and create new departments to serve growing markets. Other companies
reorganize corporate structure to downsize or eliminate departments to
conserve overheads.
Tools of Corporate Restructuring
• Mergers/Acquisitions And Amalgamation
• Mergers and Acquisitions (M&A) are transactions in which the ownership of
companies, other business organizations or operating units are transferred or
combined. As an aspect of strategic management, M&A allow enterprises to
grow, shrink, and change the nature of the business or competitive position. It
refers to the consolidation of two companies.

The reasoning behind M&A is that two separate companies together create
more value compared to being on an individual stand. With the objective of
wealth maximization, companies keep evaluating different opportunities
through the route of merger or acquisition.
Reasons for Mergers & Acquisitions
• Regardless of their category or structure, all mergers and acquisitions
have one common goal: they are all meant to create synergy that
makes the value of the combined companies greater than the sum of
the two parts.
• Becoming bigger
• Preempted competition
• Domination
• Tax benefits
• Acquiring new technology
• Improved market reach and industry visibility
• M&A take place:
• by purchasing assets
• by purchasing common shares
• by exchange of shares for assets
• by exchanging shares for shares
M & A: Different transaction
• Mergers
• The term merger and amalgamation has not been defined under the Act. M&A is
often known to be a single terminology. However, there is a thin difference
between the two. ‘Merger’ is the fusion of two or more companies, whereby the
identity of one or more is lost resulting in a single company whereas
‘Amalgamation’ signifies the blending of two or more undertaking into one
undertaking, blending enterprises loses their identity forming themselves into a
separate legal identity.
• There may be amalgamation by the transfer of two or more undertakings to a
new or existing company. ‘Transferor company’ means the company which is
merging also known as amalgamating company in case of amalgamation and
‘transferee company’ is the company which is formed after merger or
amalgamation also known as amalgamated company in case of amalgamation.
TYPES OF MERGERS
• HORIZONTAL MERGER
• Examples: Facebook's acquisition of Instagram in 2012 for a reported $1 billion.
Both Facebook and Instagram operated in the same industry and were in
similar production stages in regard to their photo-sharing services. Facebook,
looking to strengthen its position in the social media and social sharing space,
saw the acquisition of Instagram as an opportunity to grow its market share,
increase its product line, reduce competition and access potential new markets.
• VERTICAL MERGER
• To illustrate, suppose XYZ Ltd. produces shoes and ABC Ltd. produces leather.
ABC has been XYZ's leather supplier for many years, and they realize that by
entering into a merger together, they could cut costs and increase profits. They
merge vertically because the leather produced by ABC is used in XYZ's shoes.
• CONGLOMERATE MERGER
• Conglomerate merger is a merger between two companies that have no common
business areas. It refers to the combination of two firms operating in industries
unrelated to each other. The business of the target company is entirely different
from the acquiring company. The main objective of a conglomerate merger is to
achieve big size e.g., a watch manufacturer acquiring a cement manufacturer, a
steel manufacturer acquiring a software company, etc.
• Congeneric Merger
• Congeneric merger is a merger between two or more businesses which are
related to each other in terms of customer groups, functions or technology e.g.,
combination of a computer system manufacturer with a UPS manufacturer.
ACQUISITION
• Acquisition occurs when one entity takes ownership of another
entity's stock, equity interests or assets. It is the purchase by one
company of controlling interest in the share capital of another existing
company.
• Even after the takeover, although there is a change in the
management of both firms, companies retain their separate legal
identity.
• The companies remain independent and separate; there is only a
change in control of the companies. When an acquisition is ‘forced’ or
‘unwilling’, it is called a takeover.
Difference between Merger and Acquisition
AMALGAMATION
• Amalgamation is defined as the combination of one or more
companies into a new entity. It includes:
• (i) Two or more companies join to form a new company
• (ii) Absorption or blending of one by the other
CONSOLIDATION
• A consolidation creates a new company. Stockholders of both
companies approve the consolidation, and subsequent to the
approval, receive common equity shares in the new firm.
• TENDER OFFER
• One company offers to purchase the outstanding stock of the other firm at a
specific price. The acquiring company communicates the offer directly to the
other company's shareholders. Example: Johnson & Johnson made a tender
offer in 2008 to acquire Omrix Biopharmaceuticals for $438 million.
ACQUISITION OF ASSETS
• In a purchase of assets, one company acquires the assets of another
company. The company whose assets are being acquired, obtain approval
from its shareholders. The purchase of assets is typical during bankruptcy
proceedings, where other companies bid for various assets of the bankrupt
company, which is liquidated upon the final transfer of assets to the acquiring
firm(s).
• MANAGEMENT BUYOUT
• A management buyout (MBO) is a transaction where a company’s
management team purchases the assets and operations of the business they
manage. MBO is appealing to professional managers because of the greater
potential rewards from being owners of the business rather than employees.
RECENT MERGERS AND ACQUISITIONS
IN INDIA
• Vodafone India and Idea Cellular decided to merge and form country’s largest
telecom operator `Vodafone India Ltd.’ worth of more than $23 billion with a
35 per cent market share and it is the top M&A deal of 2017-18. Vodafone
and the Aditya Birla Group will have a joint control of this combined
company.
• Combining the Vodafone and idea customers, the merged entity is the
biggest telecom company in India.
• The merged entity have over 408 million customers, nearly 42% customer
market share (CMS) and nearly 33% revenue market share (RMS), leaving it
stronger placed to take on competitive pressures triggered by Jio, with 160
million subscribers and over 16% CMS and 15.3% RMS. Airtel has a CMS of
29.5% and an RMS of 31.5%.
• The Idea-Vodafone merger has been cleared by the stock exchanges,
Securities and Exchange Board of India, Competition Commission of
India, foreign direct investment clearance from the department of
industrial policy and promotion, approval given by DoT as licensor and
the merger after approval of NCLT is complete in August 2018.
Flipkart and eBay
• Indian e-commerce major Flipkart acquired the Indian wing of eBay.
The transaction was announced in April 2017 and completed in
August 2017. eBay and Flipkart have also entered into an agreement
for cross border sale. In exchange of equity stake in Flipkart, eBay had
made cash investment of $500 million and sold its eBay.in business to
Flipkart.
• As a result, Flipkart customers get expanded product choices with the
wide array of global inventory available on eBay while eBay customers
will have access to a more unique Indian inventory from Flipkart
sellers.
Merger and Acquisition Deals
• Company Profile
• Deal Rationale
• Financial Analysis
• Regulatory consideration and legal Framework
• Execution of Integration Plan
• Overall Analysis
List
• Reliance RetailFuture Group’s Retail Business
• ITCSunrise Foods
• LIC IDBI bank
• Indus Towers Bharti Infratel
• Reliance  Hamleys
• IndusInd Bank Bharat Financial
• Housing.com PropTiger.com
• Tata Steel Bhushan Steel
 List

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