Business Restructuring & Industrial Sickness

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 companiesHealthy 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

Continue 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

Sell-off (Hive off)Demerger (Spin off)

Slump sale

Management buy

out Leverage buy out

Liquidation

Divestment Techniques

Going private Share repurchase

Management buy in Reverse merger Equity carveout

Other Technique

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