Corporate Restructuring refers to the changes in the ownership pattern, changes in the assets mix and alliances ,changes in the business mix etc with a view to enhance the shareholder value.

> Purpose of Corporate Restructuring:

  - To enhance the shareholder’s value
  - To utilize the  assets properly
  - To get profitable investment opportunities
  - To diverse the business
  - To reduce cost of capital by designing innovative securities through corporate restructuring

So the corporate restructuring could be defined in terms of:

 1. Ownership Restructuring
 2. Business Restructuring
 3. Asset Restructuring

1. Ownership Restructuring:
An organization’s ownership structure can be affected through mergers and acquisitions, leveraged buy-outs, spin offs,joint ventures, strategic alliances, buyback of shares etc.

2. Business Restructuring:
It involves the reorganization of the business divisions, business units etc.It may happen through…

 • Outsourcing
 • Diversification into new business
 • Brand Acquisitions
 • Divestment etc

3. Asset Restructuring:
It involves the acquisition of sales of asset and their ownership structure.

Example:
   • Securitization of debts
   • Receivable Factoring
   • Sale and leaseback of assets etc

> Importance of Corporate Restructuring:

It plays an important role in the external and internal growth of the organization.

Types of Corporate Restructuring:

 - External Corporate Restructuring
 - Internal Corporate Restructuring

■ External Corporate Restructuring:

1. Merger
e.g.: AOL and Time –Warner

2. Acquisition:
e.g.: Tata steel buys Corus

3. Reverse Merger [for going public]

4. SPAC [Special Purpose Acquisition Company]

5. Divestiture:
It means sales of assets /divisions/subsidiaries etc
eg: Ford’s Divestiture of Jaguar brand to Tata Motors

6. De-merger or spin off:
eg:  RIL (Reliance India Lmt.) demerges into 5 companies
  a)    RIL (Reliance India Lmt)
  b)    RCom (Reliance Communication)
  c)    RCap (Reliance Capital)
  d)    Rel Energy (Reliance Energy)
  e)    Global Fuel Management

7. Equity Curve Outs:
This is also known as IPO (Initial Public Offering).Here the parent company sells a percentage of the equity to the public stock market. The percentage may differ (sometimes it is just less than 20% or just less than 50% etc)
eg: Brick and Mortar Company’s Dot com business

8. Buy-backs of shares:
It is usually done to increase the shareholding percentage of the promoters. It helps to increase the confidence of the investors in the company. It also helps the company to increase the share price.
eg: DLF buys back shares with open offer

■ Internal Corporate Restructuring:

It may happen through the sale of stocks to the staffs of the company or to the employees of the company.
eg:
  • Infosys (India) sells its stocks to the employees of the company the employees also get special offers related to the shares.
  • Virginia Geotechnical Services (VGS) also offers the stocks of the company to the internal staffs and the employees.