DR.

SHAKUNTALA MISRA NATIONAL

REHABILITATION UNIVERSITY
LUCKNOW
AN ASSIGNMENT ON
Corporate finance & project

CORPORATE RESTRUCTURING
(UNDER THE SUPERVISION OF Prof. Sandeep sir )

Submitted to Submitted by

Prof.SANDEEP SIR Himanshu kumar

Dsmnru LLB(H) 8 semester

Faculty of law
ACKNOWLEDGEMENT

The completion of this Assignment could not have been possible without the participation and
assistance of so many people whose names may not all the be enumerated. Their contribution
are sincerely appreciated and gratefully acknowledged. However, I would like to express my
deep appreciation and indebtedness particularly to the following

Prof. SANDEEP SIR for his endless support, kind and understanding spirit during making of this
assignment.

To all relatives, friends and others who in one way or another shared their support, either
morally, financially and physically, thank you.

Above all, to the Great Almighty, the author of knowledge and wisdom, for his countless love.

I thank you all

HIMANSHU KUMAR

8 TH semester

B.Com. LL.B(Hons.)
Table of content
1 Introduction

2 type of corporate restructuring

3 reasons for corporate restructuring

4 characteristic of corporate restructuring

5 Important Aspects to be Considered in Corporate Restructuring Strategies

6 Types of Corporate Restructuring Strategies

7 NEED AND SCOPE OF CORPORATE RESTRUCTURING

8 Conclusion
9 bibliography
1.Introduction
The process of corporate restructuring is considered very important to eliminate all the
financial crisis and enhance the company’s performance. The management of concerned
corporate entity facing the financial crunches hires a financial and legal expert for advisory and
assistance in the negotiation and the transaction deals. Usually, the concerned entity may look
at debt financing, operations reduction, any portion of the company to interested investors. In
addition to this, the need for a corporate restructuring arises due to the change in the
ownership structure of a company. Such change in the ownership structure of the company
might be due to the takeover, merger, adverse economic conditions, adverse changes in
business such as buyouts, bankruptcy, lack of integration between the divisions, over employed
personnel, etc.
2.Types of Corporate Restructuring
1. Financial Restructuring: This type of restructuring may take place due to a severe fall in
the overall sales because of the adverse economic conditions. Here, the corporate entity
may alter its equity pattern, debt-servicing schedule, the equity holdings, and cross-
holding pattern. All this is done to sustain the market and the profitability of the
company.
2. Organisational Restructuring: The Organisational Restructuring implies a change in the
organisational structure of a company, such as reducing its level of the hierarchy,
redesigning the job positions, downsizing the employees, and changing the reporting
relationships. This type of restructuring is done to cut down the cost and to pay off the
outstanding debt to continue with the business operations in some manner.

3.Reasons for Corporate Restructuring

Corporate restructuring is implemented in the following situations:

 Change in the Strategy: The management of the distressed entity attempts to improve
its performance by eliminating its certain divisions and subsidiaries which do not align
with the core strategy of the company. The division or subsidiaries may not appear to fit
strategically with the company’s long-term vision. Thus, the corporate entity decides to
focus on its core strategy and dispose of such assets to the potential buyers.
 Lack of Profits: The undertaking may not be enough profit making to cover the cost of
capital of the company and may cause economic losses. The poor performance of the
undertaking may be the result of a wrong decision taken by the management to start
the division or the decline in the profitability of the undertaking due to the change in
customer needs or increasing costs.
 Reverse Synergy: This concept is in contrast to the principles of synergy, where the
value of a merged unit is more than the value of individual units collectively. According
to reverse synergy, the value of an individual unit may be more than the merged unit.
This is one of the common reasons for divesting the assets of the company. The
concerned entity may decide that by divesting a division to a third party can fetch more
value rather than owning it.
 Cash Flow Requirement: Disposing of an unproductive undertaking can provide a
considerable cash inflow to the company. If the concerned corporate entity is facing
some complexity in obtaining finance, disposing of an asset is an approach in order to
raise money and to reduce debt.
4.Characteristics of Corporate Restructuring

 To improve the Balance Sheet of the company (by disposing of the unprofitable division
from its core business)
 Staff reduction (by closing down or selling off the unprofitable portion)
 Changes in corporate management
 Disposing of the underutilised assets, such as brands/patent rights.
 Outsourcing its operations such as technical support and payroll management to a more
efficient 3rd party.
 Shifting of operations such as moving of manufacturing operations to lower-cost
locations.
 Reorganising functions such as marketing, sales, and distribution.
 Renegotiating labour contracts to reduce overhead.
 Rescheduling or refinancing of debt to minimise the interest payments.
 Conducting a public relations campaign at large to reposition the company with its
consumers.

5.Important Aspects to be Considered in Corporate

Restructuring Strategies
 Legal and procedural issues
 Accounting aspects
 Human and Cultural synergies
 Valuation and funding
 Taxation and Stamp duty aspects
 Competition aspects etc.
6.Types of Corporate Restructuring Strategies
1. Merger: This is the concept where two or more business entities are merged together
either by way of absorption or amalgamation or by forming of a new company. The
merger of two or more business entities is generally done by exchange of securities
between the acquiring and the target company.
2. Demerger: Under this corporate restructuring strategy, two or more companies are
combined into a single company to get the benefit of synergy arising out of such a
merger.
3. Reverse Merger: In this strategy, the unlisted public companies have the opportunity to
convert into a listed public company, without opting for IPO (Initial Public offer). In this
strategy, the private company acquires a majority shareholding in the public company
with its own name.
4. Disinvestment: When a corporate entity sells out or liquidates an asset or subsidiary, it
is known as “divestiture”.
5. Takeover/Acquisition: Under this strategy, the acquiring company takes overall control
of the target company. It is also known as the Acquisition.
6. Joint Venture (JV): Under this strategy, an entity is formed by two or more companies
to undertake financial act together. The entity created is called the Joint Venture. Both
the parties agree to contribute in proportion as agreed to form a new entity and also
share the expenses, revenues and control of the company.
7. Strategic Alliance: Under this strategy, two or more entities enter into an agreement to
collaborate with each other, in order to achieve certain objectives while still acting as
independent organisations.
8. Slump Sale: Under this strategy, an entity transfers its one or more undertaking for
lump sum consideration. Under Slump Sale, an undertaking is sold for a consideration
irrespective of the individual values of the assets or liabilities of the undertaking.
 NEED AND SCOPE OF CORPORATE RESTRUCTURING

Corporate Restructuring is concerned with arranging the business activities of the corporate as
a whole so as to achieve certain predetermined objectives at corporate level. Such objectives
include the following:
— orderly redirection of the firm's activities;
— deploying surplus cash from one business to finance profitable growth in another;
— exploiting inter-dependence among present or prospective businesses within the corporate
portfolio;
— risk reduction; and
— development of core competencies.
When we say corporate level it may mean a single company engaged in single activity or an
enterprise engaged in multi activities. It could also mean a group having many companies
engaged in related or unrelated activities. When such enterprises consider an exercise for
restructuring their activities they have to take a wholesome view of the entire activities so as to
introduce a scheme of restructuring at all levels. However such a scheme could be introduced
and implemented in a phased manner. Corporate
Restructuring also aims at improving the competitive position of an individual business and
maximizing it's contribution to corporate objectives. It also aims at exploiting the strategic
assets accumulated by a business i.e. natural monopolies, goodwill, exclusivity through
licensing etc. to enhance the competitive advantages. Thus restructuring would help bringing
an edge over competitors. Competition drives technological development. Competition from
within a country is different from cross-country competition. Innovations and inventions do not
take place merely because human beings would like to be creative or simply because human
beings tend to get bored with existing facilities. Innovations and inventions do happen out of
necessity to meet the challenges of competition. Cost cutting and value addition are two
mantras that get highlighted in a highly competitive world. Monies flow into the stream of
production
in order to be able to face competition and deliver the best possible goods at the convenience
and affordability of the consumers. Global Competition drives people to think big and it makes
them fit to face global challenges. In other words, global competition drives enterprises and
entrepreneurs to become fit globally. Thus, competitive forces play an important role. In order
to become a competitive force,
Corporate Restructuring exercise could be taken up. Also, in order to drive competitive
forces, Corporate Restructuring exercise could be taken up. The scope of Corporate
Restructuring encompasses enhancing economy (cost reduction) and improving
efficiency (profitability). When a company wants to grow or survive in a competitive
environment, it needs to restructure itself and focus on its competitive advantage. The
survival and growth of companies in this environment depends on their ability to pool
all their resources and put them to optimum use. A larger company, resulting from
merger of smaller ones, can achieve economies of scale. If the size is bigger, it
enjoys a higher corporate status. The status allows it to leverage the same to its own
advantage by being able to raise larger funds at lower costs. Reducing the cost of capital
translates into profits. Availability of funds allows the enterprise to grow in all levels and
thereby become more and more competitive
 Conclusion
The Corporate Restructuring is the process of making changes in the composition of a
firm’s one or more business portfolios in order to have a more profitable enterprise.
Simply, reorganizing the structure of the organization to fetch more profits from its
operations or is best suited to the present situation.

1. Financial Restructuring: The Financial Restructuring may take place due to a drastic fall
in the sales because of the adverse economic conditions. Here, the firm may change the
equity pattern, cross-holding pattern, debt-servicing schedule and the equity holdings.
All this is done to sustain the profitability of the firm and sustain in the market.
Generally, the financial or legal advisors are hired to assist the firms in the negotiations.
2. Organizational Restructuring: The Organizational Restructuring means changing the
structure of an organization, such as reducing the hierarchical levels, downsizing the
employees, redesigning the job positions and changing the reporting relationships. This
is done to cut the cost and pay off the outstanding debt to continue with the business
operations in some manner.

The need for a corporate restructuring arises because of the change in company’s ownership
structure due to a merger or takeover, adverse economic conditions, adverse changes in
business such as bankruptcy or buyouts, over employed personnel, lack of integration between
the divisions, etc.
Bibliography

Book
1 corporate finance (sunil mahajan )

2 corporate finance (ahuja narendra )