Corporate Restructuring
Corporate Restructuring
RESTRUCTURING
Md Masud Chowdhury
[email protected]
+8801763831073
1
Contents
What is Restructuring?
Obstacles to Restructuring
Successful Restructuring
Types of Restructuring
2
What is Restructuring?
3
WHAT IS RESTRUCTURING?
The choice of which strategy to use will depend on the area the
organization has to improve, i.e. profitability, performance, or
operation.
4
Restructuring strategies
5
RESTRUCTURING STRATEGIES
6
Restructuring strategies
Portfolio restructuring has the best results when the firm uses the spin-
off strategy and count on subsequent mergers rather than sell-offs.
7
Reasons for Restructuring
8
REASONS FOR RESTRUCTURING
9
NEED/PURPOSE OF CORPORATE RESTRUCTURING
10
DOES RESTRUCTURING CREATE VALUE?
11
Symptoms for Restructuring
13
Obstacles to Restructuring
14
Successful Restructuring
15
Successful Restructuring
16
FORMS OF CORPORATE RESTRUCTURING
Changes in Ownership
Contraction Structures
Spin offs Leveraged buyout
Split offs Junk Bonds
Divestitures Going Private
Equity carve-outs ESOPs and MLPs
Assets sale
Corporate Control
17
EXPANSION
18
MERGERS
Merger is defined as a combination of two or more companies into a
single company.
Amalgamation is the type of merger that involves fusion of two or
A B A
Brooke Bond
India Ltd
Lipton
India Ltd B
Brooke Bond Lipton
India Ltd
19
CITICORP TRAVELERS PLAN
2nd Largest Commercial Bank in Financial conglomerate that
USA offers insurance and
Worlds Leading distributor of investment banking
credit cards services.
Issuing 60 Million Bank Cards $698 billion of assets
20
EXAMPLE
Bangladesh Development Bank Ltd (BDBL)
The case of forming Bangladesh Development Bank Ltd (BDBL) after
the merger of two state-run lenders -- Bangladesh Shilpa Bank and
Bangladesh Shilpa Rin Sangstha
Robi-Airtel merger
Robi Axiata and Airtel Bangladesh, both of which are mobile phone
operators in Bangladesh, entered into merger talks in September 2015.
Upon requisite approvals from the respective boards of directors,
on October 14 2015, an application under Section 228 and 229 of the
Companies Act 1994 was filed before the High Court Division,
Supreme Court of Bangladesh, which was eventually sanctioned by
the Hon'ble Court on July 14 2016..
21
EXAMPLE
Though the value of the Robi-Airtel merger was undisclosed, in view
of the fact that the merger would affect a large consumer base and
revenue earnings of the government, it was apparent that a merger of
this scale was being proposed for the first time in Bangladesh.
Consequently, in sanctioning the merger, the court embarked on a
detailed analysis that will be taken into account in considering the
merger application. The judgment indicated that public interests
comprising a diverse range of socio-economic factors, such consumer
interest, government revenue and employment, shall be carefully
considered in sanctioning an application for merger
22
EXAMPLE
The Hon'ble Court also elucidated that where necessary, the
court would, by resorting to its inherent jurisdiction, devise
ways and means to enable various interest groups and
stakeholders to air their concerns regarding a proposed merger.
Furthermore, the direction of the Hon'ble High Court to
formulate retirement plans for the employees of the
transferor company, Airtel, goes on to show that in
approving a scheme of amalgamation, the court will be mindful
of fairness to the employees.
Following the transaction, Axiata, the parent company of
Robi, holds a 68.7% controlling stake and Bharti Airtel
holds a 25% share in the company. Axiata's old partner NTT
Docomo of Japan holds 6.3% of stake. As a consequence of
the merger, the transferee company became the second
largest operator in the country, both in terms of
subscribers and revenues, whereas, in terms of subscribers,
23
in individual capacities, Robi was the third and Airtel was
MERGER OF BANKS: WHO WINS, WHO LOSES?
24
ACQUISITION
A B A
Oriental Bank Of Global Trust Oriental Bank Of
Commerce Bank Commerce
25
EXAMPLE
Bangladesh’s Akij Group, which has the world’s largest jute yarn
manufacturing unit, acquired Janata Jute Mills for around 7 billion
Bangladeshi taka during the covid-19 pandemic.
26
EXAMPLE
27
ACQUISITION IN MOBILE INDUSTRY
There have been a few major acquisitions in the
telecoms sector in the recent past that are worthy of
mention:
the purchase by Malaysia’s Axiata of telecom
operator Aktel, which was later rebranded as
Robi;
the acquisition of Warid Telecom by India’s
Airtel; and
the purchase of Sheba Telecom by Egypt’s
Orascom Telecom.
The acquisition of significant shares of City Cell by
SingTel and Aktel’s shares by NTT DoCoMo
were all among notable acquisitions in the sector. 28
JOINT VENTURE
A B AB
Hero Motor Honda Hero Honda
Corp
29
EXAMPLE OF JOINT VENTURE
China and Bangladesh has established a new joint venture company
(JVC), titled “Bangladesh-China Power Company (Pvt) Ltd
(Renewable),” to implement renewable energy projects having a target
to generate around 500 MW of electricity.
30
EXAMPLE
• A.K. Khan Water Health Bangladesh Ltd. (2010):
31
TENDER OFFER
B
C
D
Public Offer E
A G
H
I
F
J
K 32
EXAMPLE ---- TENDER OFFER
33
ASSET ACQUISITION
A buyout strategy in which key assets of the target company are
purchased, rather than its shares. These assets may be tangible
assets like a manufacturing unit or intangible assets like brands. This
is particularly popular in the case of bankrupt companies, who
might otherwise have valuable assets which could be of use to
other companies, but whose financing situation makes the company
unattractive for buyers.
Paten Plant
ts & M/C
A BB
Pat
A
A
Plant
Cash Stock ents
&
M/C
Land &
Building
34
EXAMPLES ---- ASSET ACQUISITION
Google acquired the Motorola for its new open source operating
system “Android” for the need of Motorola’s 17000 patents out of
which Google needs around 6000 patents.
35
FORMS OF CORPORATE RESTRUCTURING
36
CONTRACTION
Spin-off,
Split off,
Split-UP
Divestiture
Equity carve-out.
37
SPIN-OFF
A B
A B
Subsidiary
Company
of A B 38
EXAMPLES ----- SPIN-OFF
39
SPLIT- OFF
In a split off, a new company is created to takeover the operations of an
existing division or unit. A portion of existing shareholders receives stock
in a subsidiary (new company) in exchange for parent company
stock. Hence the shareholding of the new entity does not reflect
the shareholding of the parent firm. A split-off does not result in
any cash inflow to the parent company
Shareholders of
Shareholders of Company A
Company A Sharehold Sharehold
ers of ers of
Company Company
A B
A D
New Compan
A B
C D E F
C E F D
Operations of 40
SPLIT-UP
A A
B C D E
B C D E
Subsidiary 41
EXAMPLES ------ SPLIT-UP
42
DIVESTITURES
A divestiture is a sale of a portion of the firm to an outside party,
generally resulting in an infusion of cash to the parent. A firm may
choose to sell an undervalued operation that it determines to be non-
strategic or unrelated to the core business and to use the proceeds of
the sale to fund investments in potentially higher return opportunities.
Some
Operations of
A Pat
Sha
C A Sha
res
ent
s
B
B
Ope
res
rati
A Cash
ons
of A
Ass
Ope Ass
ets
ratio ets
ns
43
EQUITY CARVE OUT
A
Issues IPO of B
20% Shares of Investors
B
CCashA
20%
B Shares
of
Subsidiary Compa
Company ny B
44
of A
FORMS OF CORPORATE RESTRUCTURING
Changes in Ownership
Contraction Structures
Spin offs Leveraged buyout
Split offs Junk Bonds
Divestitures Going Private
Equity carve-outs ESOPs and MLPs
Assets sale
Corporate Control
45
CORPORATE CONTROL
46
TAKEOVER DEFENSES
47
CONTD…
White Squire
I Want to Acquire me
Acquire You Plzzzz…
A No Thanks
C is B Ok, I will Acquire
C
Acquiring Lesser part from
me U.
Recapitalization
Buy Back Of its
Shares at
Banks Premium Price
Or Lending Stock
Invest Money A OR Marke
ors Paying More as t
Dividends
49
Exchange Offer
An exchange offer, in finance, corporate law and securities law, is a
form of tender offer, in which securities are offered as
consideration instead of cash. In a bond exchange offer,
bondholders may consensually exchange their existing bonds for
another class of debt or equity securities.
50
Proxy Contest
A proxy contest is a campaign to solicit votes (or proxies) in
opposition to management at an annual or special meeting of
stockholders or through action by written consent.
51
FORMS OF CORPORATE
RESTRUCTURING
Expansion Corporate Control
Mergers and Takeover defenses
Acquisitions Share repurchases
Tender Offers Exchange offers
Asset Acquisition Proxy contests
Joint Ventures
Changes in
Contraction Ownership
Spin offs Structures
Split offs Leveraged buyout
Divestitures Junk Bonds
Equity carve-outs Going Private
Assets sale ESOPs and MLPs
52
Leveraged buyout
A leveraged buyout (LBO) occurs when the buyer of a company
takes on a significant amount of debt as part of the purchase.
The buyer will use assets from the purchased company as
collateral and plan to pay off the debt using future cash flow. In a
leveraged buyout, the buyer takes a controlling interest in the
company.
53
54
Junk Bonds
A bond that has a high risk of the underlying company
defaulting is called a junk bond. Companies that issue junk bonds
are typically start-ups or companies that are struggling financially.
Junk bonds carry risk since investors are unsure whether they'll be
repaid their principal and earn regular interest payments.
55
Junk Bond
56
Going Private
The term going private refers to a transaction or series of
transactions that convert a publicly traded company into a
private entity. Once a company goes private, its shareholders are no
longer able to trade their shares in the open market.
57
ESOP
58
59
MLPS (MASTER LIMITED
PARTNERSHIPS)
Master Limited Partnerships (MLPs) are publicly listed limited
partnerships that trade on a national securities exchange. Most
MLPs have general partners and many limited partners (the
investors).
60