MACR PPT.pptx

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    Corporate Restructuring

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    Why Corporate Restructuring?

    Increased Competition

    Advent of a new and more ecient technology

    Emergence of new markets

    Emergence of new classes of consumers Demographic changes

    Business cycles

     

    ‘Wise organizations undertake changes to increase

    their cutting edge over the competitors and enhance

    their leadership position.’ 

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    Cont..

    Companies are dramatically restructuring their: • Assets

    • perations

    • !elationship with stakeholders

    Corporate restructuring facilitates organi"ations to re#esta$lish their competitive advantage

    and respond more %uickly and e&ectively to new opportunities and une'pected challenges.

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    Why Corporate

    Restructuring?(owever) not all the changes that a company undergoes would %ualify to $e termed as *corporate restructuring+.

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    Corporate Restructuring

      Defnition

    Any change in the business capacity or portolio that is carried out by an inorganic route

    Or

      Any change in the capital structure o a company that is not a part o its ordinary course o business

    Or

    Any change in the ownership o or control over the management o the company or a combination o any two or all o the above

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    Organic Vs !norganic "rowth • Organic "rowth is the rate of a $usiness e'pansion

    through a company+s own $usiness activity) while

    !norganic "rowth means that the company has grown $y

    merger) ac%uisitions or takeovers.

    • ,hen a company with help of its ecient management

    enhances its growth rate it is referred to as organic

    growth which is also known as Internal -rowth whereas

    inorganic growth is attained when a company ac%uires a

    technology developing company in order to enhance its

    competitive advantage and growth rate and is also known

    as E'ternal -rowth.

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    Cont.. • !norganic growth is the rate of growth

    of $usiness) sales e'pansion etc. $y increasing output and $usiness reach $y ac%uiring new $usinesses $y way of mergers) ac%uisitions and takeovers.

    •  /his kind of growth also takes place due to government directives) leading to enhancement of $usiness in some identi0ed priority sector1area.

    •  /he inorganic growth rate also factors in the impact of foreign e'change movements or performance of other economies.

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    Corporate Restructuring !  #a$ Any change in the business capacity or

    portolio carried out by inorganic route

      /ata 2otors launched 3umo and later) Indica# leading to

    an e'pansion of its $usiness portfolio. (owever) these

    products were launched from /ata 2otor+s own

    manufacturing capacity in through an organic route.

    (ence) it would not %ualify as *corporate restructuring+

      /ata 2otors+ ac%uisition of 4aguar 5and !over from 6ord)

    through 4aguar 5and !over 5imited is *corporate

    restructuring+

     -rasim+s ac%uisition of 5arsen 7 /ou$ro+s 857/9 cement

    division through ltra/ech Cement 5imited is an e'ample

    of *corporate restructuring+

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    Cont..

     #b$ Change in the business portolio could also be in the nature o reduction o business handled by a company

     In the case of -rasim and 57/) the demerger

    of 57/+s cement $usiness into ltra/ech

    Cement 5imited was reduction of its $usiness portfolio and thus) amounted to *corporate

    restructuring+ of 57/.

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    Cont% !! Any change in the capital structure o a company

    that is not in the ordinary course o its business

      Capital structure refers to debt equity ratio, i.e. the proportion of debt and equity in the total capital of a company. &his capital structure is never static and changes almost daily

     ,ithin a targeted or planned range if the de$t1e%uity ratio

    ;uctuates) such changes in the capital structure do not

    amount to *capital restructuring+.

     Borrowing of a signi0cant amount of term loan or an issue of

    0ve year non#converti$le de$enture do not %ualify to $e called

    *corporate restructuring+ .

     An initial pu$lic issue) or a follow#on pu$lic issue or $uy#$ack

    of e%uity shares would permanently alter the capital structure

    of a company) and thus) would amount to *corporate

    restructuring+.

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    Cont !!! Any change in the ownership o a company or

    control over its management

     2erger of two or more companies $elonging to di&erent promoters

     Demerger of a company into two or more with control of the resulting company passing on to other

    promoters  Ac%uisition of a company

     3ell#o& of a company or its su$stantial assets

     Delisting of a company

      All these would qualify to be called exercises in ‘corporate restructuring’. 

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    'a(or )orms o Corporate Restructuring

     'erger  Consolidation

     Ac*uisition

     Divestiture

     Demerger #spin o+,split up,split o+$

     Carve Out

      -oint Venture

     Reduction o Capital

     .uy/bac0 o 1ecurities

     Delisting o 1ecurities,Company

     Corporate Debt Restructuring

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     /(A