Corporate Restructuring
Corporate structuring can be defined as the process of introducing significant changes in the structure as well as operations of an organisation. This process is necessary for the survival of an organisation in times of financial crisis, changing market conditions etc. Generally, restricting takes place when a company is being negatively affected by internal or external factors, to increase the profits, introduce new plans and strategies in the market etc. Thus, the objectives behind corporate restructuring could be long term as well as short term.
Types of Corporate Restructuring
Financial restructuring, as the name suggests, refers to the alterations or changes in the financial set-up or design of an organisation for example, equity pattern, equity holdings etc. the financial structure of the organisation. This type of restricting takes places when the company is facing financial crisis or wants to improve its financial standing in the market.
This type of restructuring occurs when a company changes the structure of hierarchy of designations, introduces or changes job positions, changes the relationship among employees or between the employers and employees etc.
Strategies of Corporate Restructuring
Under a merger, two or business entities merge i.e. combine with each other by for example, amalgamation with the intent of accumulation of assets, liabilities and other benefits like tax benefits, goodwill, economies of sale etc.
Under a takeover or acquisition, a company takes over the control of the target company. However, the target company does not get dissolved and keeps functioning under the direct control of the other company.
A demerger takes place when a company splits into two or more small companies or when a previous merges dissolves.
A joint venture refers to a commercial enterprise or business venture that is started by two or companies. The companies decide to share the costs, expenses, profits etc. that arise out of the joint venture.
When a company disinvests i.e. sells out, exchanges a benefit or liquidates the assets, it is referred to as disinvestment.
In a strategic alliance, two or companies come together in order to achieve certain objectives that are common to all or gain mutually out of the course of business. However, the companies continue to function as independent entities as well.
Slump sale refers to the sale of company’s one or more undertakings to another company for a consideration irrespective of the respective value of the assets and liabilities attached to the particular undertaking or undertakings.
