Every company goes through corporate restructuring at some point or the other. Effectively speaking a corporate restructuring refers to any changes effected within a company with regards to its ownership, concerned legalities, changes of structure and format etc. These changes are generally done so as to increase its market value in the eyes of shareholders and creditors.
This corporate restructuring can be of two types:
• Financial restructuring which involves any changes made to the capital or equity of a company. These changes are facilitated by means of mergers and acquisitions, divestures, joint ventures etc.
• Operational restructuring involves changes in the operational structure of the company. This may again be because of takeovers, spin-offs, best mergers and acquisitions Sydney etc.
Different methods of corporate restructuring
Different methods of corporate restructuring can be grouped into three main categories which are:
• Expansions: These refer to those processes which are used to effectively enlarge the firm with regards to its operational capacity, employees, infrastructure etc. These processes include:
• Mergers wherein two firms merge to form a single firm. This can take place in two ways:
• Either by absorption or
• By consolidation
• In a merger all the assets, liabilities, businesses and shareholders interests are completely amalgamated. In some cases, however, one company might get purchased by another company without
• Either the shareholders of the purchased company getting percentage of ownership or
• Continuing with the current business of the purchased company.
- Mergers can be of three types:
• Horizontal mergers wherein two firms in similar businesses get merged,
• Vertical mergers wherein the two firms merged are involved in the production of different stages of the same end-product and
• Conglomerate mergers wherein two unrelated businesses merge or combine.
• Acquisitions involve acquiring total control over all assets, management etc. of another company without combining the businesses. Acquisitions generally occur with the mutual consent of the acquired company.
• Takeover refers to a forced acquisition wherein the acquired company is an unwilling partner.
• Joint ventures are facilitated when two different or separate firms willing combine their resources in such a way that neither firm gets dissolved.
• Control and Ownership: This involves a process in which the ownership is forced out from the hands of the current board. The new management board then facilitates a full or partial strategy of liquidation wherein sale of assets is involved.
Whatever the strategy implemented, the reason remains the same in all cases. These corporate restructuring are all done with a view of earning profits and improving the health of a company.Read More