Meaning

It involves an activity to make the organization more

balanced, profitable & enable the company to achieve its objective in a more simplified manner than earlier. It involve merger, amalgamation, disinvestment, expansion, joint venture or financial reorganization like buyback of share, issue of sweat equity share, redemption of share, issue of convertible share, consolidation of share, share split & issue of deep discount bond.

Objective of Business restructuring

Profitability & ROI improvement
Higher economies of scale Optimum break even point

Reducing financial & operation risk

Continuous improvement in shareholder value

Reason of Business Restructuring

Meet global competition Changes in fiscal & government policies Revolution in information technology Improve productivity & cost reduction Global market advantage because of rupee convertibility Competitive environment Achieving economies of scale Diversification reduce business risk Sick companies can be revived Help in reducing competition by way of vertical & horizontal integration

Implication of Business Restructuring

Reduce number of players in market
Emerging of new look companies Healthy economic state of nation

Social discontent

Business process re-engineering : The critical analysis &

radical redesign of existing business processes to achieve improvement in performance measures.

Financial Restructuring
Financial reorganization is resorted to bring balance of

debt & equity, short term & long term financing, to achieve reduction in financial charges, to reduce cost of capital, increase EPS, improve market value of share, reduce control of financiers on management of company etc. The formulation of capital structure is necessitated for improving the financial strength of company

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Steps in financial restructuring 1. Valuation of business 2. Formulation of new capital structure 3. Exchange of old securities for new securities

Financial reconstruction: In financial reconstruction, the capital amounts & asset value are reduced to write off past losses, as well as, rearrange the capital structure of business to make turnaround of business on sound financial basis.

Techniques of Corporate Restructuring

Corporate restructuring Techniques
Expansion techniques Divestment Techniques

Other Techniques

Merger/amalgamation /acquisition Takeover Joint venture Strategic alliances Franchising Intellectual property right Holding companies Takeover by reverse bid

Sell-off (Hive off) Demerger (Spin off) Slump sale Management buy out Leverage buy out Liquidation

Going private Share repurchase Management buy in Reverse merger Equity carveout