Corporate Restructuring Essay Example for Free

Corporate Restructuring EssayPurpose of Corporate restructuring 1. To enhance the shargonholder value2. To utilize the assets properly3. To get profitable investment opportunities4. To diverse the business5. To reduce cost of capital by designing innovative securities through corporate restructuringTypes of Corporate restructuring 1. Mergers or amalgamationThe words mergers and amalgamation are always interchangeable but there is slight difference in mergers and amalgamation. Merger is fusion of two or more entities and it is a process in which the identity of one or more entities is lost (as is often seen when political parties merge). In the case of a merger, the assets and liabilities of a club get vested into the assets and liabilities of another caller-out. The shareholders of the company being merged become shareholders of the larger company (as when two or more smaller banks merge with a larger bank). On the other hand, in the case of amalgamation, shareholders of both (or more) companies get new shares allotted that are of a new company altogether.2. Acquisition or takeover Acquistion may be delineate as an act of acquiring effective control over assets or management of a company by another company without any conclave of businesses or companies.In acquirement , two or more companies may remain independent, separate legal entity but there may be change in control of companies. Acquistion When managements of acquiring and target companies mutually and willingly agree for the takeover it is called acquisition or friendly takeover Takeover Takeover means acquisition . When the company takes the target company unwillingly or forcefully it is called takeover. The term takeover is understood to connote hostility.3. Leveraged buyouts (LBO) A leverage buyout (LBO) is an acquisition of a company in which the acquisition is substantially financed through debt. 4. Divestment A divestment involves the sale of companys assets or product lines ordivision s or brand to the outsiders.It is reverse of acquisition. in that respect are 2 types of divestments sell- remove and spin-offSell off When a company sells a part of its business to a third party it is called sell off Spin-offs When a company creates a new company from the existing single entity it is called a spin-off. 5. Reverse merger / Reverse Takeover The acquisition of a mankind company by a private company so that the private company can bypass the lengthy and complex process of going public. The consummation typically requires reorganization of capitalization of the acquiring company.