Corporate Restructuring
Corporate restructuring refers to the changes in ownership, business max, assets mix and alliances with a view to enhance the shareholder value. Hence, corporate restructuring may involve ownership restructuring, business restructuring and assets restructuring. A company can affect ownership restructuring through mergers and acquisitions, leveraged buy-outs buyback of share spin-offs, joint ventures and strategic alliances. Business restructuring involves the reorganization of business units or divisions. It includes diversification into new businesses, out-sourcing, divestment; brand acquisitions etc. asset restructuring involves the acquisition or sale of assets and their ownership structure. The examples of assets restructuring are sale and leaseback of assets, securitization of debt, receivable factoring etc.
The basic purpose of corporate restructuring is to enhance the shareholder value. A company should continuously veal-ate its portfolio of businesses, capital mix and ownership and assets arrangements to find opportunities for increasing the share-holder value. It should focus on assets utilization and profitable investment opportunities, and reorganize pr fives less profit-able or loss making business/products. The company can also enhance value through capital restructuring: it can design innovative securities that help to reduce cost of capital.
Our focus here is on mergers and acquisitions, leveraged buy-outs and divestment. We have discussed many other aspects of restructuring like buyback of shares, capital structuring etc. earlier in this book.