Types of Restructuring
Types of Restructuring
Restructuring
Dr. A. Sridhar
FCS, LL.M, Ph.D in Law
Assistant Professor
NALSAR University of Law
Mobile: 9989394290
Mail: [email protected]
Types of Growth
Organic Growth
It is through internal strategies, which may relate to business or financial
restructuring within the organization that results in enhanced customer base,
higher sales, increased revenue, without resulting in change of corporate
entity
Inorganic Growth
Inorganic growth provides an organization with an avenue for attaining
accelerated growth enabling it to skip few steps on the growth ladder. Like
Mergers, Amalgamations etc
Corporate Restructuring
Corporate Restructuring is the process of significantly changing a
company’s business model, management team or financial structure to
address challenges and increase shareholder value. Corporate
Restructuring is inorganic growth strategy
Need and Scope of Corporate
Restructuring
To enhance shareholders value
Deploying surplus cash from one business to finance profitable growth in another
Exploiting inter-dependence among present or prospective businesses
Risk reduction
Development of core-competencies
To obtain tax advantages by merging a loss-making company with a profit-
making company
Revolution in information technology has made it necessary for companies to
adopt new changes for improving corporate performances.
To become globally competitive
To increase the market share
Convertibility of rupee has attracted medium-sized companies to operate in the
global markets.
Competitive business necessitated to have sharp focus on core business
activities, to gain synergy benefits, to minimize the operating costs, to maximize
efficiency in operation and to tap the managerial skill to the best advantage of
the firm.
By diversification of business activities, the minimization of business
risk is possible and it enables the firm to achieve at least the
minimum targeted rate of return
With the integration of sick unit into the successful unit, the
adjustment of unabsorbed depreciation and write off of accumulated
loss is possible and thereby the successful unit can have strategic
tax planning
To Improve the Balance Sheet of the company ( by disposing of the
unprofitable division from its core business)
Staff Reduction
Outsourcing its operations such as technical support and payroll
management to a more efficient 3 rd Party
Rescheduling or refinancing a debt to minimise the interest
payments
Shifting of operations such as moving of manufacturing operations to
lower-cost locations
Types of Restructuring
Financial Restructuring
It Deals with restructuring of capital base and raising fiancé for new projects.
The reasons can be
Poor Financial Performance
External Competition
Erosion or loss of market share
Emerging Market Opportunities