Corporate Restructuring

Corporate restructuring is an action taken by the corporate entity to modify its capital structure
or its operations significantly.
Corporate Restructuring is the process of redesigning one or more aspects of a company.

Needs of Corporate Restructuring

the needs for undertaking Corporate Restructuring are as follows:
i) To focus on basic strengths, operational synergy & other effective allocation of
managerial capabilities and infrastructure too.
ii) Consolidation and economies of scale by expansion and diversion to exploit
extended domestic and global markets.
iii) Revival and rehabilitation of a sick unit by adjusting losses of the sick unit with
profits of a healthy company.
iv) Acquiring a constant supply of raw materials and access to scientific research and
technological developments.
v) Capital restructuring by a suitable combination of loan and equity funds to decrease
the cost of servicing and improve the return on capital employed.
vi) Improve corporate performance to bring it on par with competitors by adopting the
radical changes brought out by information technology.

Importance of Corporate Restructuring

1. Adaptation to changing Market conditions
2. enhancing Operational efficiency
3. unlocking Hidden potential: Corporate restructuring can uncover hidden potential within an
organization. By reorganizing teams, leveraging talent, and reallocating resources, businesses
can tap into previously untapped opportunities. For instance, a company may discover that its
research and development department has valuable intellectual property that can be
commercialized to create new revenue streams. Whitesquire’s comprehensive approach to
restructuring ensures that businesses can fully capitalize on their existing assets and
capabilities.
4. Facilitating Growth and Expansion
5. Managing Financial Challenges: Corporate restructuring can also help businesses address
financial challenges and ensure their long-term viability. Whether it involves debt
restructuring, cost-cutting measures, or improving cash flow management, Whitesquire’s
financial expertise plays a pivotal role in guiding businesses towards financial stability. By
developing robust financial strategies and implementing sound financial practices, Whitesquire
helps companies navigate through turbulent times and emerge stronger.

Reasons for Corporate Restructuring

Internal factors
• Operational Inefficiencies
• High Operational Costs
• Change in Leadership or Management Vision
• Financial Pressures
• Labour Issues and Union Negotiations
• Cultural Misalignment

External factors
• Globalization and Competition
• Natural Disasters / Global Pandemics
• Environmental Sustainability

Corporate Restructuring Techniques

a) Mergers and acquisitions

b) Divestitures: Companies can sell off non-core assets or divisions in order to focus on
their core business operations.
c) Joint ventures: Companies can enter into joint ventures with other companies in order
to share resources and expertise.
d) Consolidation: Consolidation happens when two or more companies merge to become
one. Also known as amalgamation, business consolidation is most often associated with
M&A activity. 1 This generally happens when several similar, smaller businesses
combine to form a new, larger legal entity.
e) corporate carve-out: also known as a business carve-out or divestiture, is a strategic
process in which a company decides to sell or separate a specific segment, business
unit, or subsidiary from its overall operations. This can involve spinning off a division,
business line, or subsidiary into an independent entity.
f) Demerger: A demerger also known as a spin-off, is a restructuring mechanism where a
corporate entity is split into separate parts which become new legal entities. The legal
entities form their own separate identity with their distinct assets, liabilities, and
functions.
g) Capital Reduction: The process of decreasing the company's shareholding equity with
the help of share cancellations and share repurchases is defined as capital reduction.
This is generally done in cases of mergers and acquisitions, restructuring, internal
reconstruction, increasing shareholder value, etc.
h) Delisting: Delisting is the removal of a listed security from a stock exchange. The
delisting of a security can be voluntary or involuntary and usually results when a
company ceases operations, declares bankruptcy, merges, does not meet listing
requirements, or seeks to become private.

Merger
 A merger is a corporate strategy involving the combining of two or more companies
into a single entity. This can happen through various methods, such as a stock swap, cash
payment, or a combination of both.

Importance of Merger
1. Market Expansion
2. Economies of Scale
3. Diversification: Mergers can help companies diversify their product offerings or geographic
presence, reducing risk and increasing opportunities for growth.

4. Access to Resources
5. Synergies: Mergers can create synergies that result in increased revenues, reduced costs, or
other strategic benefits that would not be achievable by the companies operating independently.

Reasons for Merger

1. Strategic Growth
2. Increased Market Share
3. Cost Savings and Synergies: Mergers can create cost-saving opportunities through
economies of scale, operational efficiencies, and synergies. By combining operations,
companies can streamline processes, reduce duplication, and lower costs, leading to improved
profitability.
4. Access to New Technologies or Expertise
5. Risk Mitigation
6. Enhanced Financial Performance
7. Strategic Realignment: Mergers can be a way for companies to strategically realign their
business objectives, reposition themselves in the market, or respond to changing industry
dynamics. This can help companies stay relevant and competitive in a rapidly changing
business environment.
Types of Merger
1. Horizontal Merger
2. Vertical Merger
3. Conglomerate Merger: Conglomerate mergers involve companies that operate in unrelated
industries or have diverse business interests. These mergers are often pursued to diversify risk,
access new markets, or leverage complementary capabilities.

4. Market Extension Merger

5. Product Extension Merger

How to Get Fund For Merger

1. Equity Financing
2. Debt Financing
3. Asset Sales
4. Private Equity Investment: Companies can seek investment from private equity firms or
venture capitalists to finance the merger. Private equity investors can provide capital in
exchange for equity ownership or other financial instruments.

5. Joint Ventures or Partnerships

6. Cash Reserves: Companies can use their existing cash reserves or retained earnings to fund
the merger. This approach avoids taking on additional debt or diluting ownership but may limit
financial flexibility.

Synergy
The term synergy refers to the interaction or cooperation among elements that produce a
combined effect greater than the sum of their individual effects. It’s often used in business,
management, and medical contexts to describe situations where working together yields better
results than working separately. Synergy can also imply that the collaboration of a group or
team leads to innovative solutions or greater productivity. In essence, synergy is about creating
a win-win situation through effective teamwork and collaboration.

● Positive Synergy
Positive synergy occurs when the combined efforts of a group result in a greater outcome than
the sum of their individual efforts. This is often referred to as the 2 + 2 = 5 effect, where
collaboration leads to increased productivity, innovation, and performance.

● Negative Synergy
Conversely, negative synergy happens when the collective efforts lead to a result that is less
than the sum of individual efforts, known as the 2 + 2 = 3 effect.
Reasons why synergy can occur
● Complementary Skills
● Shared Goals
● Effective Communication
● Trust and Cooperation
● Diversity
● Leadership
● Organizational Structure
● Cultural Alignment: When the team’s culture supports teamwork and collaboration,
synergy is more likely to occur.

Benefits

● Increased Efficiency
● Enhanced Creativity and Innovation
● Improved Performance
● Cost Savings
● Risk Mitigation

Challenges

● Differences in Goals and Objectives

● Communication Barriers
● Lack of Trust and Collaboration
● Resource Allocation and Sharing
● Coordination and Integration Challenges.
Types:
a)Manufacturing synergy : It refers to the cooperative interaction and integration of different
elements within the manufacturing process to achieve outcomes that are greater than the sum
of their individual parts. In essence, it involves combining resources, processes, technologies,
and expertise in such a way that the overall efficiency, productivity, and effectiveness of
manufacturing operations are enhanced.
This synergy can occur at various levels within the manufacturing ecosystem, including:
● Internal Operations
● Supply Chain Collaboration
● Technology Integration
● Strategic Partnerships
● Continuous Improvement
b)Operations synergy: It refers to the strategic alignment and integration of operational
activities within an organization or between multiple entities to achieve enhanced efficiency,
effectiveness, and performance outcomes. It involves harmonizing processes, resources, and
systems to leverage synergistic effects and realize greater benefits than would be possible
through individual efforts. Operations synergy can manifest in various forms, including:
1. Streamlined Processes
2. Resource Optimization
3. Improved Quality and Consistency
4. Enhanced Flexibility and Responsiveness
5. Cost Savings and Efficiency Gains
6. Risk Mitigation
7. Cross-Functional Collaboration

C) Financial synergy refers to the combined financial benefits or advantages that result from
the merger, acquisition, or collaboration between two or more entities. It occurs when the
joining of these entities leads to improved financial performance, increased profitability, or
enhanced financial stability beyond what each entity could achieve independently. Financial
synergy typically arises from various factors, including:

1. Economies of Scale
2. Increased Revenue
3. Cost Reductions
4. Enhanced Access to Capital
5. Tax Benefits
[Link] Capital Structure
[Link] Diversification
d) Tax synergy refers to the financial benefits that result from the strategic combination or
restructuring of businesses, assets, or operations with the aim of reducing overall tax liabilities.
It typically occurs in the context of mergers, acquisitions, reorganizations, or other forms of
corporate transactions where the tax implications play a significant role.

Tax synergy can manifest in several ways, including:

1. Tax Efficiency
2. Tax Rate Reduction
[Link] Credits and Incentives
4. Tax Loss Utilization
5. Transfer Pricing Optimization
6. Debt and Equity Structure Optimization

The Hubris theory

The theory of managerial hubris (Roll, 1986) was proposed by Richard Roll,
who postulated that managers may have good intentions in increasing their firm’s value but,
being over-confident; they over-estimate their abilities to create synergies. The Hubris theory
constitutes a psychological based approach to explain M&As. It states that the management of
acquiring firms over rates their ability to evaluate potential acquisition targets. The hubris
theory states that when a merger or acquisition announcement is made, the shareholders
of the bidding firm incur a loss in terms of the share price while those of the target firm
generally enjoy a contrary effect. The prime reason behind this is that when a firm announces
a merger offer to the target, the share price of the target firm increases because shareholders in
the target firm are ready to transfer shares in response to the high premium that will be offered
by the Acquiring firm, (Machiraju, 2010).The risk of potential failure, due to overrated
acquisition price which significantly exceeds the fair value of the target company, increases in
an auction.

Critics of the Theory.

[Link] hubris hypothesis is not supported by the analysis of the joint impact of the uphill
movement of the target’s stock and the downhill movement of the acquirer’s [Link] two
companies merge and acquire another, there should be a proper analysis and several approval
stages that have to be met for example undertaking independent valuation of the
target.

2. There is no systematic and reliable approach than relying merely on subjective

judgments and gut instincts it does difficult to a hubristic leadership research

Stratergic Alliance
An arrangement between two companies to undertake a mutually beneficial project while each
retains its independence.

Why strategic alliance?

• Sharing resources like products, distribution channels, manufacturing capability, project
funding, capital equipment, knowledge, expertise, or intellectual property, to create Synergy to
gain Competitive Advantage
• “Our success has really been based on partnerships from the very beginning.” Bill Gates

Motives for strategic alliance

• Adding value to product.
• Improving market access.
• Strengthening operations.
• Adding technological strength.
• Enhancing strategic growth.
• Building finance strength.
• New market entry
Key factors of strategic alliance
• Select the proper partners for the intended goals
• Share the right information
• Negotiate A deal that includes risk and benefit
• Come to a realistic agreement on the time
• Mutual, flexible commitment on what’s suitable to change, measure and share within
each partner’s culture
• Respect and protect the brand of each partner
Advantage
• Improve organization efficiency.
• Offer to access new market and technologies.
• Reduce the impact of risk.
• Learning from partners
• Alliance could help a company develop a more effective process expand into a new
market or develop an advantage over a competitor.

Disadvantage
• Significant differences between the objectives
• Irreconcilable differences in business culture and management styles.
• Loss of control over such important issues as product employees, etc. Quality, operating
costs,
Process of Stratergic Alliance
• Setting alliance strategy
• Selecting a partner
• Structuring the alliance
• Managing the alliance
• Re-evaluating the alliance
Types of Strategic Alliance
• Joint Venture: an agreement by two or more parties to form a single entity to undertake
a certain project. Each of the businesses has an equity stake in the individual business
and share revenues, expenses & profits.
• Global Strategic Alliances: working partnerships between companies (often more than
2) across national boundaries & increasingly across industries. Sometimes formed
between company & a foreign government, or among companies & governments
• Equity strategic alliance: an alliance in which 2 or more firms own different percentages
of the company they have formed by combining some of their resources & capabilities
to create a competitive advantage.
• Non-equity strategic alliance: an alliance in which 2 or more firms develop a
contractual-relationship to share some of their unique resources & capabilities to create
a competitive advantage.

Legal procedure & provisions of companies act, 2013

• Examination of object clauses
• Intimation to stock exchanges
• Approval of the draft merger proposal by the respective boards
• Application to high courts
• Dispatch of notice to share holders and creditors.
• Holding of meetings of share holders and creditors
• Petition to High Court for confirmation and passing of HC orders
• Filing the order with the registrar
• Transfer of assets and liabilities
• Issue of shares and debentures
Companies Act 2013
• The Companies Act 2013 is an Act of the Parliament of India which regulates
incorporation of a company, responsibilities of a company, directors, dissolution of a
company.
• The Act has replaced The Companies Act, 1956 (in a partial manner) after receiving
the assent of the President of India on and with only 98 provisions 29 August 2013.
• A company is an artificial person created by law. It has separate legal entity, perpetual
succession, and common seal.
Characteristics of Companies Act 2013
• Artificial person
• Separate legal entity
• Perpetual existence
• Limited liability
• Separate property
• Common seal
Provisions of Companies Act 2013
• Incorporation of Companies
 • Corporate Governance
• Financial Reporting
• Share Capital and Debentures
• Corporate Social Responsibility (CSR)
• Insolvency and Bankruptcy
• Penalties and Enforcement
Regulations Of Sebi And Take Over Code
SEBI stands for the Securities and Exchange Board of India. It is the regulatory body governing
the securities market in India. Established in 1988, SEBI aims to protect the interests of
investors, regulate and develop the securities market.
Regulations of SEBI
[Link] Measures Against Takeovers:
Other Companies Act restricts an individual or a company or a group of individuals from
acquiring shares in a public company to 25 per cent of the total paid-up capital.

[Link] To Register The Transfer Of Shares:

In order to refuse situation of hostile takeover attempts companies have been given power to
refuse to register the transfer of shares. If this done, a company must inform the transferee and
the transfer within 60 days.
[Link] Regulations:
SEBI regulations ,which provide guidelines for the voluntary or compulsory delisting of shares
from stock exchange .
4. Protection Of Minority Shareholders’ Interests:
The minority shareholder to sell their shares if:
>The offer has been made to the shareholders of the company
>The offer has been approved by at least 90 per cent of the shareholders of the company whose
transfer is involved, within 4 months of making the offer.

5. Disclosure Of Share Acquisition/Holding

Any person who acquires 5% or 10% or 14% shares or voting rights of the target company.
Should disclose of his holdings at every stage to the target company and the Stock Exchanges
within 2 days of acquisition or receipt of intimation of allotment of shares.

6. Public announcement and open offer

An acquirer who holds 15% or more but less than 75% of shares or voting rights of a target
company.
• Can acquire such additional shares to exercise more than 5% of the voting rights in any
financial year ending March 31 only after making a public announcement

7. Offer price
The acquirer is required to ensure that all the relevant parameters are disclosed in the letter of
offer.
Negotiated price under the agreement which triggered the open offer
Price paid by the acquirer for acquisition
8. Disclosure :
SEBI mandates timely and accurate disclosure of information related to mergers and
acquisitions to ensure transparency and protect the interests of investors
TakeOver Code
Takeover signifies a transaction or a series of transactions whereby one company acquires
control over the assets of the other company, either directly by becoming the owner of those
assets or indirectly by obtaining control of the management of the company.
Key provisions of the takeover code typically include, open offers, disclosures requirements
for acquirers, obligations regarding fair treatment of shareholders, and procedures for
conducting takeover bids.
The Takeover Code, 2011
• Increase in Initial Threshold Limit from 15% to 25%
• Creeping Acquisition Limit raised from 15%-55% to 25%-75%
• Increase in Offer Size from 20% to 26%
• Abolition of Non-compete fees
• Definition of "Control" modified
• Deletion of Regulation 12 of the Old Takeover Code, 1997
• Voluntary Open Offer
• Eligibility
• Conditions
• Restrictions
• Detailed provisions relating to Indirect Acquisitions

Methods of Valuation
[Link] Cashflow Method
Discounted cash flows valuing a company . This technique is highlighted in the Leading with
Finance as the gold standard of valuation.
Discounted cash flow analysis is the process of estimating the value of a company or
investment based on the money, or cash flows, it’s expected to generate in the future.
Discounted Cash Flow =
Terminal Cash Flow / (1 + Cost of Capital) × [Link] Years in the Future
[Link] Capitalisation
It’s calculated by multiplying the total number of shares by the current share price . One of the
shortcomings of market capitalization is that it only accounts for the value of equity, while
most companies are financed by a combination of debt and equity.

Market Capitalization = Share Price x Total Number of Shares

[Link] Value
The enterprise value is calculated by combining a company’s debt and equity and then
subtracting the amount of cash not used to fund business operations.

Enterprise Value = Debt + Equity – Cash

4. EBITDA
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a
measure of a company’s operating performance and profitability before accounting for non-
operating expenses and non-cash items. EBITDA is often used by investors and analysts to
evaluate a company’s financial health and performance.
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization.
[Link] Multiple
Earnings multiple is used to assess how the market values a company’s earnings relative to its
share price. A higher earnings multiple may indicate that investors are willing to pay more for
each unit of earnings generated by the company, suggesting that the company is perceived as
having strong growth prospects or profitability.
Earnings Multiple = Market Value of the Company / Earnings
[Link] Based Valuation
This formula calculates the value of a company based on its total assets minus its total
liabilities. It provides a straightforward way to assess the worth of a business by focusing on
its assets and liabilities without considering other factors like future earnings or market
conditions.

EXCHANGE RATIO CALCULATION METHOD

MEANING
●The exchange ratio is calculated by dividing the market value of the acquiring company by
the market value of the target company
METHODS
●Asset-based exchange ratios: This method is based on the value of the assets of the two
companies. The exchange ratio is calculated by dividing the total value of the acquiring
company's assets by the total value of the target company's assets.-
●Earnings-based exchange ratios: This method is based on the earnings of the two companies.
The exchange ratio is calculated by dividing the earnings of the acquiring company by the
earnings of the target company.
●Market-based exchange ratios: This method is based on the market value of the two
companies' shares. The exchange ratio is calculated by dividing the market value of the
acquiring company by the market value of the target company.
CALCULATION FOR THE EXCHANGE RATIO
Exchange ratio based on net asset = net asset of target company /net asset of acquiring company
Exchange ratio based on EPS =EPS of Target company /EPS of Acquiring company
Exchange ratio based on Market price= Market Price of Target /Market price of Acquiring
If Target Company wants to continue same EPS Of their own company/If they want to continue
the EPS Of Acquiring Company after merger= Shares issued by target company/Premergee no
of shares.

LBO and MBO

LBO
LBOs are basically an acquisition strategy where the acquirer, usually a group of investors,
buys the shares of the target company in bulk form stock markets and fund this activity by
raising funds from banks and lending institutions. A group of small investors with the intention
of takeover, starts buying target companies shares from stock markets in huge numbers. The
money for this purpose is raised in the form of debts from banks and financial institutions. The
target company then becomes a private company since the ownership and control moves in the
hands of only small group of

characteristics of a leveraged buyout (LBO):

1. Financing: LBOs typically involve using a significant amount of debt to finance the
acquisition of a company.
2. Private Equity Involvement: LBOs are often carried out by private equity firms, who provide
the necessary capital for the buyout.
3. High Potential Returns: LBOs are structured in a way that aims to generate high returns on
investment for the acquiring party.
4. Restructuring: After the acquisition, the acquired company may undergo operational or
financial restructuring to improve its performance.
5. Exit Strategy: The acquiring party usually intends to exit the investment within a certain
timeframe, either through a sale or an initial public offering (IPO).

Stages of LBO
I. First Stage: Raising Funds
II. Second Stage: Creating an Shell Company or an SPV and Transferring the Funds
raised
III. Third Stage: Purchasing the Shares or Assets
IV. Fourth Stage: Putting the Taken-Over Company on Track
V. Fifth Stage: Taking the Company Public again-Second IPO
MBO
A management buyout, also known as an MBO, is a process where the existing management
team of a company purchases the business from its current owners. It allows the managers to
take control and become the new owners of the company they work for.
Step 1: Analysis
This initial step includes market analysis, SWOT analysis, products and competitors of the
business.
Step 2: Negotiation Procedure
This is a critical process as the buyers and sellers negotiate and settle on common ground
regarding the company’s price.
Step 3: Financial Analysis
The third step helps the buyout team prepare for the next step, which is the acquisition of
financials. With financial analysis, managers can present charts about their company’s
upcoming models and finances to their shareholders and investors. This is vital for any
company to publish such data to hold onto its investors’ trust.
Step 4: Acquirement of MBO Funding by Buyers
The management team sets forth to gather the necessary funds they agreed upon to purchase
the company from sellers. The management team can opt for personal or financial funding.
Step 5: Planning for Transition
The transition process begins as all teams coordinate to execute their transfer plan. Then, they
make the necessary changes in communication, tax, organisational management and
succession.
Step 6: Transaction Purchase
The management buyout process at this stage has to ensure legal compliance as per State and
National rules to complete the transaction process.
Step 7: Ownership Transfer
This step overlooks the transfer of powers at a company’s top-tier level. All ownership and
decision-making roles transfer to the new owners from the old ones. This transfer of powers
can take a few months to years, depending on the firm.
Step 8: Funding Paybacks
This is the last step of setting up a management buyout. Here, the management buyout team
repays financial institutions and equity firms with MBO funds which they gain from
increments.

Advantages
[Link] of Key Talent:-
[Link] Focus on Long-Term Value Creation:-
[Link] Flexibility:-
[Link] Alignment of Interests:-
[Link] Transaction Costs:-
Disadvantages
[Link] Levels of Debt:-
[Link] for Conflicts of Interest:-
[Link] of Diversification:-
[Link] Access to Capital:-
[Link] Expertise:-
Hostile Takeover
A hostile takeover is a type of acquisition where a company (the acquirer) takes control of
another company (the target company) without the approval or consent of the target company’s
board of directors
Techniques
▪ Causal Pass: A casual pass in a hostile takeover refers to a situation where one company
attempts to acquire another company through a friendly approach, rather than through
aggressive or hostile tactics. This could involve making a formal offer to the target
company’s board of directors, engaging in negotiations, and seeking their approval for
the acquisition. The goal is to achieve a successful takeover without causing
unnecessary conflict or resistance from the target company.
▪ Open Market Purchases: In an open market purchase, the acquiring company buys
shares of the target company on the open market through public exchanges like the
stock market. This allows the acquiring company to gradually increase its ownership
stake in the target company without directly engaging with the target company’s
management. Open market purchases can be a discreet way for the acquiring company
to accumulate shares and gain control of the target company over time.
 ▪ Street Sweeps: Street sweeps involve a more aggressive approach to acquiring shares
in a hostile takeover. In a street sweep, the acquiring company may work with
investment banks or brokers to rapidly purchase large blocks of the target company’s
shares from institutional investors, hedge funds, or other large shareholders. Street
sweeps are often conducted quickly and can involve significant financial resources to
acquire a substantial ownership stake in the target company in a short period of time.
▪ Drawn Raid: A dawn raid refers to the practice of buying up a large amount of shares
right at the open of the day's trading.
The goal of a dawn raid is to amass a large number of shares in a target company by
one company to influence a potential takeover of the target.
▪ Bear Hug: A bear hug is an offer to buy a publicly listed company at a significant
premium to the market price of its shares. It is an acquisition strategy designed to appeal
to the target company's shareholders. Bear hugs are used to pressure a reluctant
company's board to accept the bid or risk upsetting its shareholders.
▪ A Saturday Night Special: is a now obsolete takeover strategy that involved a company
attempting to acquire another one by making a sudden public tender offer, usually over
the weekend. The offer was only open for a short interval, typically a few days,
pressurizing shareholders to make a quick decision and leaving management with little
time to mount an adequate defense and weigh up its options.
▪ A proxy fight: refers to the act of a group of shareholders joining forces and attempting
to gather enough shareholder proxy votes to win a corporate vote. Sometimes referred
to as a "proxy battle,” this action is mainly used in corporate takeovers
▪ A tender offer: is a bid to purchase some or all of the shareholders' stock in a
corporation. Tender offers are typically made publicly and invite shareholders to sell
their shares for a specified price and within a particular window of time. The price
offered is usually at a premium to the market price and is often contingent upon a
minimum or a maximum number of shares sold.
Criteria for friendly take over measures
A friendly takeover is a scenario in which a target company is willingly acquired by another
company. Friendly takeovers are subject to approval by the target company's shareholders, who
generally greenlight deals only if they believe the price per share offer is reasonable
Criteria
1. Valuation: The acquiring company should offer a fair price for the target company's shares,
taking into consideration its current financial performance, growth prospects, and market
position.

2. Synergies: The acquiring company should be able to demonstrate how the merger will create
value through synergies, such as cost savings, revenue growth, or market expansion.

3. Strategic fit: The acquiring company should have a clear strategic rationale for the takeover,
such as entering new markets, diversifying product offerings, or gaining access to new
technologies.
4. Cultural compatibility: The acquiring company should consider the cultural fit between the
two organizations, as a mismatch in organizational culture can lead to integration challenges
and hinder the success of the merger.

5. Shareholder approval: The acquiring company should ensure that the majority of the target
company's shareholders are in favor of the takeover, either through a friendly agreement or a
vote at a shareholder meeting.

6. Regulatory approval: The acquiring company should conduct thorough due diligence to
identify any potential regulatory hurdles that could impede the takeover process and work
proactively to address them.

7. Communication: The acquiring company should maintain open and transparent

communication with the target company's management, employees, and other stakeholders
throughout the negotiation process to build trust and ensure a smooth transition.

Anti take over measures

1. Active measures

Green mail

"green mail" is when someone tries to force a company to buy back their shares at a higher
price to avoid a takeover. It's like a way to make money by pressuring a company.

Standstill agreement

A standstill agreement is when two parties agree to temporarily pause or delay certain actions
or activities. It's often used in business or legal contexts to provide a period of time for
negotiation or evaluation. During the standstill period, both parties agree not to take any further
steps or actions that could escalate a situation or hinder progress towards a resolution.

White knight

. It refers to a company or individual that purchases a minority stake in another company to

provide support and prevent a hostile takeover. While a white knight typically offers a full
acquisition, a white squire invests in the target company without seeking full control. It's like
a friendly ally lending a helping hand to protect the company.

Pic man defense

"pac man defense" refers to a defensive strategy employed by a target company to fend off a
hostile takeover attempt. It involves the target company turning around and making a
counteroffer to acquire the company that initially made the hostile bid. It's like the target
company suddenly becoming the aggressor and attempting to take over the company that was
trying to acquire it.

Preventive measures

Poison pill

A poison pill is a tactic used by a company to protect itself from being taken over by another
company. It involves implementing certain measures that make the takeover more difficult or
expensive for the acquiring company. It's like a defensive move to make the takeover less
attractive or appealing.

Flip in plan

The flip-in plan is another type of poison pill defense strategy. It allows existing shareholders
of a target company to purchase additional shares at a discounted price if a hostile takeover
attempt occurs. This dilutes the ownership of the acquiring company and makes the takeover
more expensive. It's like giving the existing shareholders a special deal to help them maintain
control and fend off the hostile bidder.

Flip over plan

refers to a type of anti-takeover provision. It allows existing shareholders of a target company

to convert their shares into shares of the acquiring company at a predetermined ratio if a hostile
takeover occurs. This can make the takeover more difficult for the acquiring company, as it
potentially increases the number of shareholders they wouldn't need to deal with. It's like a way
for the target company's shareholders to "flip over" and become shareholders of the acquiring
company instead.

Back end plans

"back end plans" typically refer to the strategies and actions taken after the completion of a
merger or acquisition deal. These plans focus on integrating the two companies and
maximizing the benefits of the merger or acquisition. They often include activities such as
streamlining operations, combining systems and processes, aligning cultures, and realizing
synergies. The goal is to ensure a smooth transition and maximize the value created by the deal.

Voting plans

When it comes to voting in mergers and acquisitions, shareholders of the target company
usually have a say in the decision-making process. They are typically given the opportunity to
vote on whether to approve or reject the proposed merger or acquisition. The specific voting
procedures can vary depending on the jurisdiction and the terms outlined in the merger or
acquisition agreement. Shareholders may vote either in person at a meeting or through proxy
voting, where they authorize someone else to vote on their behalf. The outcome of the vote
determines whether the deal moves forward or not.

POST MERGER CULTURAL ISSUES

Post-merger cultural issues often include:

1. *Cultural Clash*: When two organizations with different cultures merge, there can be
clashes in values, communication styles, and work approaches.

2. *Employee Uncertainty*: Employees may feel uncertain about their roles, reporting
structures, and job security, leading to anxiety and decreased morale.

3. *Leadership Integration*: Aligning leadership styles and priorities can be challenging,

especially if there are conflicting visions or power struggles.

4. *Loss of Identity*: Employees may feel a loss of identity as their organization's culture gets
diluted or overshadowed by the dominant culture of the acquiring company.

5. *Communication Breakdown*: Poor communication during the merger process can lead to
rumors, misinformation, and decreased trust among employees.
6. *Employee Retention*: High-performing employees may leave if they feel alienated or
undervalued in the new culture, leading to talent loss.

7. *integration of Systems and Processes*: Merging companies often face challenges in

aligning and integrating their systems, processes, and workflows, leading to inefficiencies and
frustration.

DISINVESTMENT

Disinvestment refers to the process of reducing or liquidating an investment, typically in the

context of a business or government-owned asset. It can involve selling shares of a company,
divesting from a particular industry, or privatizing state-owned enterprises by selling them to
private investors. The goal of disinvestment can vary, such as raising funds, improving
efficiency, or reducing government control in the economy.

Different approaches to disinvestment

• Minority Disinvestment:
• Majority Disinvestment:
• Complete Privatisation:

Objectives of disinvestment

• To meet the budgetary needs

• To reduce fiscal deficit
• To improve public finances and overall economic efficiency
• To introduce, competition and market discipline
• To fund growth and development programmes
• To encourage wider share of ownership
Importance of disinvestment

1. Capital Generation
2. Efficiency Improvement
3. Reducing Government Intervention
4. Wealth Distribution
5. Market Development
6. Promoting Competition
Joint venture & Bootstrapping

• A joint venture is when two or more companies perform a business project together for
a set period of time.
• Joint Venture is a win/win collaboration between two or more Companies, sharing
resources to solve common problems and achieve goals.
• It can be called a Strategic Alliance or Partnering as well.
Types of Joint Venture
1) Domestic Joint Venture: The Domestic Joint Venture means all bpartners with the same
nationality.
2) International Joint Venture: The international Joint Venture set up by partners of
different nationalities.

ADVANTAGES OF JOINT VENTURE

1. Helps an organization to enter in to new markets or new product lines
2. Access to increased resources and improved expertise & technology
3. Helps to build credibility
4. Reduces risk
5. Relatively cheap
6. Synergy

DISADVANTAGE

[Link] time consuming and difficult

[Link] Differences
3. May not be clear & understood
4. Loss of Competitive Advantage
5. There can be an imbalance

Bootstrapping
Bootstrap is a situation in which an entrepreneur starts a company with little capital. An
individual is said to be bootstrapping when he or she attempts to found and build a company
from personal finances. It is a Primary types of Funding.

Why Is Bootstrapping So Important?

1. Grows Quickly
2. Certain milestones
3. Controll full ownership
4. Focus on priorities

ADVANTAGES
• Financial Control
• Creative Freedom
• Reinvest Profits
• Flexible Timelines
• More Financial Discipline
DISADVANTAGES
• Personal Risk
• Lack of Networking opportunities
• Slower Growth
• May Not be able to Survive in Competitive market