CORPORATE RESTRUCTURING (SYBMS)
INTERNAL NOTES
Q.1) Types of corporate restructuring?
Restructuring is the corporate management term for the act of reorganizing the legal,
ownership, operational, or other structures of a company for the purpose of making it more
profitable, or better organized for its present needs. Other reasons for restructuring include a
change of ownership or ownership structure, demerger, or a response to a crisis or major
change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also
be described as corporate restructuring, debt restructuring and financial restructuring.
There are generally two different forms of corporate restructuring; the reason for
restructuring will. determine both the type of restructuring and the corporate restructuring
strategy:
Financial restructuring may occur to changes in the market or legal environment and are
needed in order for the business to survive. For example, a corporate entity may choose to
restructure their debt to take advantage of lower interest rates or to free up cash to invest in
current opportunities.
Organizational restructuring is often implemented for financial reasons as well but focuses on
altering the structure of the company rather than its financial arrangements. Legal entity
restructuring is one of the most common types of organizational restructuring. Two common
examples of restructuring are in the sales tax and property tax arenas. The first involves
creation of a leasing company for operating assets that can allow for sales and income tax
savings. In the second example, for property taxation, restructuring can change the method of
taxation or create a revaluation opportunity to improve reporting positions.
Q.2) Need & Scope of corporate restructuring?
*Need
1)Corporate Restructuring is concerned with arranging all the business activities
of the corporate/enterprises as a whole s to achieve predetermined objectives at
the corporate level. Such objectives include the following:
2)Orderly redirection of the firm's activities.
3)Exploiting inter-dependence among present or prospective businesses within
the corporate portfolio.
4)Redistribution of surplus cash from one business to finance profitable growth
in another.
5)Risk reduction
6)Development of core competencies restructuring may be financial
restructuring, technological restructuring, market restructuring, and
organizational restructuring.
*Scope
1)Internal Streaming and Reorganizing the Business Process:
2)Closing uneconomical units
3)Inducing programs to reduce costs.
4)Reducing the head count.
5)Disposing off the assets which are not being used.
6)Reorganizing the business process
Q.3 Financial Engineering?
1)Issuing different types of shares like non-voting or preference shares.
2)Issuing different types of debts to meet the needs of fixed and working
capital.
3)Buying back of shares.
4)Infusing foreign debts and equities.
Q.4 Portfolio And Asset Restructuring?
1)Purchasing assets of another firm.
2)Merging two or more companies or entities.
3)Acquisition of a part of an entity which leads to the change in ownership
Q.5 Planning, Formulation, And Execution Of Various Restructuring
Strategies?
Takeover may be a useful strategy for entry into a new product, territory or
segment; or a means for faster growth, in addition to internal, organic
expansion; or access to resources like capacity, talent, technology, brands or
funds. For B, selling out may be a good strategy to divest an unrelated business,
focus on core businesses and release resources for such concentration.
1. Planning Phase
SMART objectives, ROI
Restructuring makes sense only if profitability and market position arc
improved. The business objectives should be ambitious, but realistic, time
bound, specific and clearly measured.
Budget for restructuring
Without a sufficient budget, any restructuring is "mission impossible"
Internal communication to gain team's support & give/get ongoing feedback
Incorrect/poor communication of the process creates chaos.
Project team creation: x-functional, x-country
The project team should include all key people who are needed to make the
project successful.
One fully dedicated project manager/coordinator
"Shared" responsibility does not work in restructuring.
"Sponsor" from top management team who will support the process
Without support from the top management level, the process can get stacked
easily.
Person responsible for each country
For multinational restructuring, the voice from the country level with first hand,
local knowledge should be heard,
Project management tools and procedures in place
Project management tools should be used, especially in complex projects. A
company can use existing procedures or create new ones.
2. Implementation test phase
Test phase for one country, area, division, function, head office, etc.
Small-scale tests are needed to avoid the risk of big and costly mistakes
affecting the whole organisation.
3. Measuring & analysis of test phase
Measuring results against SMART objectives.
Corrections of initial plans, if necessary
This is the most important part of organisational restructuring process in its
implementation phase. If a test is not successful, the whole organisational
restructuring is in danger.
4. Full rollout
Measuring results against SMART objectives
Corrections to implementation
