Mergers, Acquisitions, and Corporate Restructuring: types & strategies

The term “Corporate Restructuring” itself means to re-structure the corporate system. The branch of insolvency and corporate law deals with altering the whole Company’s structure. The Restructuring of a Corporate Company is usually taken into by a business that is facing financial issues. The major purpose of restructuring is to re-arrange the formation of the company to generate optimum performance. Let’s discuss more on the concept of Corporate Restructuring and its strategies.

 What is Corporate Restructuring?

Corporate restructuring is also considered as business restructuring. Corporate restructuring is a process in which a company changes its legal structure to make sure that the business of the Company is running seamlessly and smoothly. The restructuring is usually done when the business is either facing any economic or financial problems. The Company enters into a restructuring agreement with its lenders when it is unable to pay its corporate debt. 

What are the forms of Corporate Restructuring?

The major forms of corporate restructuring are as given below:

• Financial Restructuring- Financial restructuring is generally considered when the companies plan for merger or acquisition by another company. The companies do not face any financial problems in this form of restructuring. 
• Debt Restructuring- The strategy of Debt restructuring is generally used by a company when it wants to modify its strategy to pay off the Company’s debt. A lender or creditor would normally permit the company to restructure itself when they are deciding to repay a debt. 

What are the types of Corporate Restructuring Strategies?

1. Merger: Merger is a concept where two or more business entities are combined together either by way of amalgamation or by creating a new company or by absorption. There are four ways to do a merger which includes:
2. Horizontal Merger- Two companies operating at the same level.
3. Vertical Merger – Companies here merge which are in different stages of their production cycle.
4. Conglomerate Merger- Companies in different businesses merge together.
5. Cash Merger- Companies merge by exchanging securities between the target and the acquiring company.
6. Demerger: Under this strategy of corporate restructuring, two or more companies get combined into a sole company to avail the synergy benefit as the outcome of such merger.
7. Reverse Merger: This strategy gives the opportunity to convert the unlisted public companies into a listed public company without choosing for an IPO (Initial Public offer).
8. Acquisition or Takeover: The acquiring company takes the whole control of the target company in this strategy. 
9. Joint Venture (JV): When a corporate entity is created by two or more companies to commence any financial act together then the entity formed is called the Joint Venture. Both the parties consent to contribute in equal proportion and also share the revenues, expenses, and control of the company together.
10. Strategic Alliance: Under this strategy, two or more corporate entities with the purpose to collaborate with each other enter into an agreement in order to achieve some objectives but at the same time acting as an independent organization.
11. Disinvestment: When any corporate body liquidates or sells out a subsidiary or an asset, it is known as “divestiture”.
12. Slump Sale:  An entity transfers one or more undertakings for consideration in a lump sum under this strategy. In Slump Sale, an undertaking for consideration is sold notwithstanding the values of individual assets or liabilities of that undertaking.

Conclusion

The corporate restructuring permits the company to keeps its operation in a continual mode in various ways. Even when the Company is in its worst phase, Corporate restructuring somehow brings back the Company in a better structure to function good enough to have profits again. Team of professionals from ASC Group are well versed with the tax and regulatory environment in India and stays constantly abreast with the changes in tax policies, administration, and regulations.