CORPORATE ADVISORY SERVICES
CORPORATE RESTRUCTURING
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Revising the organizational structure
Rearrangement and negotiation of organizational
functions
Reverse of a merger
Objective of restructuring is to increase value
CORPORATE RESTRUCTURING REASONS
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Need to meet global competition
Better align interests of managers and shareholders
Mainly done to reverse conglomerate mergers
Make the firm more attractive to investors
TYPES OF CORPORATE
RESTRUCTURING
Spin-Offs:
A company owns or creates a subsidiary whose shares
are distributed on a pro rata basis to the shareholders
of the parent company.
Parent company usually retains a small percentage of
ownership of subsidiary – 10 to 20%.
Often Spin-Offs follow an IPO sale of under 20% of
shares.
Subsidiary becomes a public firm.
Cash flow is not generated from a spin-off.
TYPES OF CORPORATE
RESTRUCTURING
Equity Carve-outs
It is the IPO of some part of the common stock of the
subsidiary.
Seasoned equity offer of parent company.
Cash flow is generated but differs in that this initiates
public trading of subsidiary.
Equity claim is on subsidiary’s assets and not parent’s
assets
TYPES OF CORPORATE
RESTRUCTURING
• Split-ups
When a firm splits into two or more entities – usually
accomplished with carve-outs and spin-offs of individual
parts of the firm.
TYPES OF CORPORATE
RESTRUCTURING
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Divestitures
Sale of segment of a company to a third party for cash
and / or securities.
INTENTION OF DIVESTITURES
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Dismantling conglomerates
Abandoning core business
Changing strategies
Adding value by selling into a better segment
Large additional investment required
Repeat past successes
Discard unwanted business from prior acquisitions
Finance prior acquisitions done before LBO
Ward off takeover
Meeting Government requirements
LBOs
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LBO is purchase of a company by a small group of
investors, financed heavily with debt
Usually resulting in becoming a private company
LBO involves large ownership by managers
Usually to turn firm around
LBO interim financing is usually bank debt
Permanent financing
 Bank debt (Senior, Secured)
 High-yield bonds (Junk bonds)
HOSTILE MERGERS
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Bidder Unwanted
Targeted repurchase
Target firm agrees to buy back some shares from
bidder (usually at a premium)
Self-tender
Firm makes offer to buy back its own shares (limit)
while excluding targeted shareholders
Poison Pills
Calls with contingent strike prices
Issued to shareholders
Legislation
HOSTILE MERGER JARGONS
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Golden Parachutes
Crown Jewels
White Knights
Lock Ups
Shark Repellents
Green Mailing