2. Introduction:
• One of the dictionary meaning of word
“restructuring” is “rearrangement” thus
business restructuring refers to
rearrangement of corporate structure .
• It is a process by which a business
organizations alters its present structure in
order to create a new structure in the place
of its existing structure.
• Business restructuring may involve change in
the asset structure, liability structure or both
of them.

3. Importance:
 In today‟s world, along with increasing focus
on globalization and liberalization, there is
free competition amongst businesses. So
Business restructuring helps to identify the
opportunities.
 It helps the business to survive and stay the
fittest from the rest others.
 It plays an important role in the external and
internal growth of the organization.

4. Advantages:
 Strategic Benefit
 Economies of Scale
 Economies of Scope
 Economies of Vertical Integration
 Complementary Resources
 Tax Shields
 Utilization of Surplus Funds
 Managerial Effectiveness

5. Reasons:
 To reduce the cost of operations for the
company.
 To make company more competitive as
compared to other peers in industry.
 To reduce the interest burden for the company.

6. Advantages:
 To utilize the excess capacities.
 company will go for corporate restructuring so
as to improve shareholders confidence in the
company.
 Another reason for corporate restructuring is
when company is into too many businesses or
over diversified it may want to & concentrate
only on one business

9. Acquisition
 An Acquisition is an act of acquiring effective
CONTROL by one company over assets or
management of another company.
 Acquisition is also called as “TAKEOVER”

10. Types of Acquisitions
 Asset Purchase
 Slump Sale.
eg- Grasim sold sponge iron unit to Welspun
power for 1030 crore.
 Itemized Sale.
 Share Purchase.
eg – Daiichi sankyo company ltd has acquired
controlling stake of Ranbaxy.

11. Case Study- TATA - JLR deal
 Features of this acquisition-
 Tata Motors Ltd. announced the acquired two
iconic British brands - Jaguar and Land Rover
(JLR) from the US-based Ford Motors for US$
2.3 billion.
 Purchase consideration were JLR's
manufacturing plants, two advanced design
centers in the UK, national sales companies
spanning across the world, and also licenses
of all necessary intellectual property rights.

12. Why did TATA go for JLR?
(Adv. Of Acquisition)
 Expanding its international footprint
 leveraging on in-house capabilities
 Enter the high-end premier segment of the global
automobile market
 latest technology due to two advance design
studios and technology
 Instant recognition
 competitive advantage as Corus was the main
supplier of automotive high grade steel to JLR and
other automobile industry in US and Europe

13. Case Against Acquisition-
(Disadvantages Of Acquisition)
 Ford purchased JLR at $5 bn and sold at almost
half the price to TATA after operating it for
losses.
 Ford failed to re-brand and integrate these
luxury brands with its product portfolio
 Increased the earnings volatility.
 Had to Fuse in another US$ 1 billion in JLR.
 Tata Motors raised $3 billion (about Rs 12,000
crore) through bridge loans for 15 months from a
clutch of banks, including JP Morgan, Citigroup,
and State Bank of India

15. Definition of Merger?
 The combining of two or more companies ,
generally by offering the stockholders of one
company securities in the acquiring company
in exchange of the surrender of their stocks.

16. Types of Mergers?
A) Vertical merger:
Merger with supplier or customers.
Ex : Kochi Refineries Ltd merges into
Bharat Petroleum Corporation India.
B) Horizontal merger:
Between firms in the same kind of business.
Ex : Centurion Bank of Punjab merging into
HDFC

17. Case study on ADIDAS-REEBOK
Merger!!!
 In August 2005,german Adidas Salomon AG
announced to acquire Reebok at an estimated
value of $3.78 billion.
 At that time Adidas reported net income of
$423 million per year whereas Reebok had an
net income of $209 million.
 Merger was a sense because both companies
competed for no.2 and no.3 positions following
Nike being at the top.

18. The facts of case-study??
 Why merger done??
 Advantages of merger??
 Dis-advantages of merger??

20. Demerger
 The tranfer by a company of one or more of
its business division to another company
which is newly set.
 It is a converse of merger.
 It result into two company i.e., demerged
company and resultant company.

21. Types of demergers
 The demergers may be of two types:-
 Split-up Demergers.
 Spin-off Demergers.
 Divestiture.

22. Case Study On bajaj
company
 The effective date of demerger of baja
company was on 20th february 2008.
 Bajaj was demergered into Bajaj Auto Ltd. and
Bajaj finance ltd.
 After demerger of bajaj 5.6% growth in the
company.

23. Other forms
subsidiarisation:
 Transferring a business to a wholly owned
subsidiary
 Under this option business gets transferred to a
subsidiary and the parent company continue to
hold 100% equity stake in the subsidiary
Eg: EID Parry (india) limited transferred the
parryware division to a wholly owned subsidiary
(Parryware glamourooms pvt. Ltd.)

24. Buyback of Shares
 Buyback is acquiring its own shares from the
existing shareholders by the company.
E.g.:
 Philips Electronics India Limited
 Gitanjali Gems Limited

25. objectives
 To return surplus cash to shareholders as an
alternative to a higher dividend payment or
investing the surplus cash in existing or new
operations.
 Adjust or change the company‟s capital
structure quickly, say for those companies
seeking to increase its debt/equity ratio.
 To improved the various performance
parameters like EPS,DPS, operating cash flow
per share, etc.
 To thwart the attempts of a hostile takeover.

26. Capital Reduction
Reduction of share capital may be effected in
the following ways:
 In respect of share capital not paid-up,
extinguishing or reducing the liability on any of
its shares;
 Cancel any paid-up share capital, which is lost,
or is not represented by available assets. This
may be done either with or without extinguishing
or reducing liability on any of its Shares; or

27.  Pay off the paid-up share capital, which is in
excess of the needs of the company. This may be
achieved either with or without extinguishing or
reducing liability on any of its shares
E.g.: Hindalco Industries Limited under took a court
scheme to write off following “Expenses” against
balance in share premium account-
 Impairment of assets, investments, Goodwill and
other
 intangible assets on consolidation.
 Interest on borrowing on acquisition

28.  Diminution in value of subsidiaries
 Costs associated with existing
projects/divisions
 Consultants fees in connection with financing
of
 acquisition

29. Management Buyouts
 Involves the management team’s purchase of the bulk of the
firm’s shares.
 Create a win-win situation for shareholders who receive a
premium for their stock and management who retain control.
 To avoid lawsuits, the price paid must represent a higher
premium to the current market price.
 Alternatively, the target may make itself less attractive by
divesting assets the bidder wants.
 Cash proceeds of the sale could fund other defenses such as
share buybacks

30. Leveraged Buyouts
 Borrowed funds are used to pay for all or most of the purchase
price.
 Can be of an entire company or divisions of a company
 The tangible assets of the company are used as collateral for
the loans
 Investors in LBOs are referred to as financial buyers because
they are primarily focused on relatively short- to intermediate-
term financial returns

31. Stock Exchange Norms
Stock Exchange Norms
Presently, Stock Exchange(s) are providing various
other norms before giving approval to the
Companies for
„Merger‟, „Demerger‟ „Reduction of Capital‟

32. Stock Exchange Norms
Minimum Capital Requirements
 Issued & paid up Equity Capital – Rs 10
crores
(if there is a change in management/control)
OR
 Issued & paid up Equity Capital – Rs 3
crores
(If there is no change in management/control)
AND
 Minimum Net Worth – 20 crores
(Post amalgamation)
*BSE Stipulations

33. Stock Exchange Norms
Continuous Listing Norms
 (Transferee Co is Listed Co. & Transferor Co is Unlisted Co.)
 Non- Promoter Holding – 25% of Post -merger
Capital
* (The entire holding of the shareholders of the transferor company be
excluded)
 If Non- Promoter Holding – is less than 25% of
Post merger capital, then the company has to
go for offer for sale of the excess portion.


34. Stock Exchange’s Views
• Valuations Analysis
• No undue benefit to
Promoters/Particular group
• Investors interest not to be affected
• Back door Entry for the benefit of
listing
• Change in Management/control

35. Methodology Issues
 Methodology for Merger and Acquisition are
different.
 Types of Business.
 Government Regulations.
 Industry Specific Methods
 Difficult in obtaining Transaction multiples.
 Issues Related to Market price method.

36. Adjustment in Valuation
 Accounting Policy
 Contigent liability and assets
 Sales tax Exemption
 Preference shares
 ESOPs and Warrants
 Carried forward loss

37. Legal Procedure of Business
Restructuring
 Examination of Object Clauses
 Intimation of Stock Exchange
 Approval of the Draft Amalgamation Proposal
by the Respective Boards
 Application to the High Courts
 Dispatch of notice to Shareholders and
Creditors

38. Cont…
 Holdings of Meetings of Shareholders and
Creditors
 Petition to the High Court for Confirmation and
passing of High Court
 Filing the Order with the Registrar
 Transfer of Assets and Liabilities
 Issue of Shares and Debentures