Corporate Restructuring is a wider concept. Corporate Restructuring is a means of significantly changing the company’s business model, management team by cutting out and merging departments. Corporate Restructuring means to rebuild, to rearrange to give a new structure. Companies might follow restructuring as a business strategy to increase shareholder value and address challenges of future. Through Corporate restructuring risk will be reduced and core competencies would be developed. Corporate restructuring also aims at improving the competitive position of an individual business and maximizing its contribution to corporate objectives. Cost cutting and profitability are the two mantras that get highlighted in the competitive world for corporate restructuring. Reducing the cost of capital translates into profits. Corporate Restructuring aims at different things at different times for different companies and the single common objective in every restructuring exercise is to eliminate the cons and combine the pros.
Needs for Corporate Restructuring:-
- Revival and rehabitation of sick unit by adjusting the losses of sick unit with the profits of healthy company.
- Consolidation and economies of scale. To focus on core strength and efficient allocation of managerial capacities.
- Improve corporate performance.
- Revival and rehabitation of sick unit with profits of healthy company.
- Changing technology and improve the corporate performance.
- Utilization of idle resources and effective management of competition.
Type of Corporate restructuring strategies-
1. Merger
2. Demerger
3. Reverse Mergers
4. Disinvestment
5. Takeovers
6. Joint venture
7. Strategic alliance
8. Franchising
9. Slump Sale
10. Merger-Combination of two or more companies which can be merged together either by way of absorption or amalgamation or by formation of new company.
11. Demerger-Segregation of one or more undertaking as they can focus more on specific task after demerger.
12. Reverse Merger-It is basically a opportunity for unlisted companies to become publically listed companies without opting for initial public offer.
13. Disinvestment-means selling of public sector undertaking to private sector undertakings.
14. Takeover-Takeover is the process when an acquirer takes over control over the target company.
15. Joint venture-When two or more companies agree to undertake financial activity together and share the revenue, expenses, control.
16. Strategic Alliance-Any agreement between two or more parties to collaborate with each other in order to achieve certain objective while continuing to remain independent organization is called strategic alliance.
17. Franchising-Franchising may be defined as any agreement whereby one party grants another party right to use trade name, certain business system and process according to specification.
18. Slump sale-Selling of whole of undertaking without values being assigned to individual assets and liabilities.
Author Bio
