CORPORATE RESTRUCTURING

PREAMBLE
The term corporate restructuring is a wide & varied term. It has no legal definition as the term
has not been defined in any legal legislation. Hence, neither it has clear and precise meaning
nor can it be defined with precision.
Etymologically the term Restructuring means giving new structure or rebuild or
rearrange. In this perspective, Corporate Restructuring is defined as a process of
rearranging the organizational or business structure of the company for increased efficiency
and profitable growth.
It is a process undertaken by a business / corporate/ any other such entity whether
proprietorship or partnership for the purpose of bringing about changes for better and to make
the business competitive.
WHAT DOES IT IMPLY
Corporate Restructuring implies activities related to expansion/contraction of a firms
operations or changes in its assets or financial or ownership structure or changes in corporate
control.
OBJECTIVES & RATIONALE

Orderly redirection of the firm's activities

Deploying the firms surplus funds from one business to another for profitable growth
Exploiting the inter dependence among the present and perspective business within

Corporate Portfolio
Risk reduction
Development of core competencies
Growth
Synergistic operational advantages
Revival of weak or sick company
Tax benefits
Advantages of brand equity / goodwill / IP
Horizontal / vertical integration

BENEFITS OF CORPORATE RESTRUCTURING

Enhancing economy (COST REDUCTION) and improving efficiency

(PROFITABILITY)
Cost cutting and value addition are the two mantras that get highlighted in a highly
competitive world

Eliminate the disadvantages and combine the advantages at all level

Reducing cost of capital and translate it into profits

FORMS OF CORPORATE RESTRUCTURING

Merger and Amalgamation- Merger or amalgamation may take two forms-:

(1) Horizontal Merger- Acquisition of a company in the same industry in which the
acquiring firm competes increases a firms market power by exploiting
(2) Vertical Merger- Acquisition of a supplier or distributor of one or more of the

firms goods or services.

Takeover
Reverse Merger
Demerger
Joint Venture
Strategic Alliance
Management Buyout
Buy back of shares
Sub-division of shares