Corporate Restructuring: Meaning
Corporate Restructuring: Meaning
Corporate Restructuring: Meaning
Meaning:
Corporate restructuring is the process of redesigning one or
more aspects of a company.
The process of reorganizing a company may be implemented
due to a number of different factors, such as positioning the
company to be more competitive, survive a currently
adverse economic climate, or poise the corporation to move
in an entirely new direction.
ORGANIC GROWTH
Idea Vodafone merger and acquisition in India reuters reported the Vodafone Idea merger to be valued at $23 billion.
Although the deal resulted in a telecom giant it is safe to say that the 2 companies were pushed to do so due to the entry of
Reliance Jio and the price war that followed. Both companies struggled amidst the growing competition in the telecom
industry.
The deal worked both for idea and Vodafone as Vodaphone went on to hold a 45.1% stake in the combined entity with the
Aditya Birla group holding a 26% stake and the remaining by Idea. On the 7th of september, Vodafone Idea unveiled its brand
new identity ‘Vi’ which marked the completion of the integration of the 2 companies.
Disney and Pixar
Mickey and Nemo. Pinocchio and “Toy Story.” Cinderella and “Cars.” The merger of legendary Walt Disney and everything-
we-create-kids-adore Pixar was a match made in cartoon heaven. Disney had released all of Pixar’s movies before, but with their
contract about to run out after the release of “Cars,” the merger made perfect sense. With the merger, the two companies could
collaborate freely and easily.
Few examples;
Integration of Facebook, Whatsapp, Instagram & Messenger
Disney + & Hotstar
Canara bank with Syndicate bank
Adidas with Reebok
Flipkart with Myntra..etc
Purpose:
• Increase diversification
• Reshape the company’s competitive scope by reducing intense rivalry
• Share complementary skills and resources
• Increase market share and reduce competition in the industry
• When companies undergo a horizontal merger, the underlying principle is to create value. A
successful merger should create value in which combining the companies would be worth more
than if each company were under independent ownership. In a horizontal merger, 1 + 1
(referring to two independent companies) should be greater than 2 (the merged company).
Examples for horizontal merger:
1. Integration of Facebook, Whatsapp, Instagram & Messenger
This is one of the best examples of horizontal mergers of present times. All of these
were independent social media platforms started by different companies and one after
another, over the years, these were integrated into one big social media company. The
platforms still remain independent in the form that the various websites still exist, but
they have come under one company under Facebook Inc. led by Mark Zuckerberg. One
of the reasons for merging with Whatsapp is to develop and implement the end to end
encryption technology to preserve user privacy. Even though the websites and apps are
distinct, the users can interact among them freely by being on one single network. Also,
as Facebook reached maturity, integration is a strategy to drive growth.
2. Disney + & Hotstar
Disney + is Disney’s own online video streaming platform, while
Hotstar was India’s streaming platform owned by Star network.
Instead of entering into the streaming industry of India directly,
Disney has merged with Hotstar, which is now known as Disney+
Hotstar. This merger has seen a little bit of rebranding and Disney
has aimed to launch this platform from March end in 2020, for the
consumers in India who could access Disney’s shows and films on
this merged platform. With this merger, and the launch of its own
streaming services, Disney has removed a lot of its content from rival
platforms such as Netflix to capture higher market share.
3. Canara bank with Syndicate bank
As per the Indian Reserve Bank (RBI) rules, Syndicate Bank and
Canara Bank merged on April 1, 2020. However, the bank's IFSC code
stayed the same for nearly a year to offer consumers a buffer period.
MD & CEO, Canara Bank, L V Prabhakar said: The amalgamated Bank shall
massively enhance the reach of banking services to the larger public and
augment the financial inclusion activities currently underway. All branches
of Syndicate Bank will function as branches of Canara Bank.
This bank will become the fourth-largest public sector bank with a business
of Rs 15.20 lakh crore, which will be roughly 1.5 times of Canara Bank.
It will have the third-largest branch network in India with 10, 342
branches, which will have a strong presence in South India.
4. Adidas with Reebok
Adidas and Reebok are the world leading multinational companies producing
sportswear and sports equipment. Reebok is considered to be the oldest
company of this type, because it produces sportswear since the end of the 19th
century.
Adidas on its turn is a quite younger company and it appeared in 1920 and started
producing sports shoes.Both companies have been developing gradually and very
soon conquered the market of the whole world winning attention and respect of
new and new customers. In 2000-s both companies reached the top of their
development and the companies did not only produce sportswear but also played
the role of sponsors of numerous football, basketball teams, etc. Of course, in the
modern world of strict competition on the market both companies strived to win
the leading positions in the world. The financial position of Reebok was quite
unfavourable and Adidas suggested merging both companies into the single
unity.In 2005 Adidas purchased 100% of Reebok’s bonds and made it its subsidiary.
5. Flipkart with Myntra
Flipkart and Myntra merger case study brought the two biggest e-tailers of
India together. The merger made it possible for both investors Flipkart and
Myntra to strengthen their parts. Thus Flipkart strengthened its structure of
product offering while Myntra got a chance to leverage its infrastructure.
Moreover, the Flipkart and Myntra merger was taken with a vision to
compete with Amazon as well others.
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Product Extension
Merger & Forward
Integration
Product Extension Merger
The company has got its own logistic service for the
supply chain of the products. FBA model also known as
Fulfillment by Amazon where the company takes care of
the entire logistics to end customer support. When a
customer orders from a particular seller, then the product
is shipped to Amazon’s warehouse facility after that the
company is responsible to ship the product to the end
customer.
Amway
The company directly sells its product to the customer.
The company has got no middlemen for the shipping of
its product to the end customer. The company is the one
who is responsible for the ship the product to the end
customer and has its own logistic service.
It relies on cocoa bean suppliers to provide it with its raw materials – it also
relies on distributors such as Walmart and Target to sells its products.
Obviously, this is a very rare type of integration that infrequently occurs
mainly due to the cost, but also due to potential legal disputes that may arise
due to monopoly control of the vertical supply chain.
CONGENERIC MERGER
Meaning…
A congeneric merger / Concenric merger it is a merger of two companies operating in
the same industry / related industry but offer different products or different lines of
products.
The two companies involved in a congeneric merger may share similar production
processes, distribution channels, technology.
Purpose…
• Congeneric merger can help the merged company to quickly increase its market
share or expand its product lines
Reasons for Merger
• Diversification of products or services
• Larger market shares for the company’s
• To reduce the risk
• More profits & financial gains
1. CITICORP AND TRAVELERS GROUP
• The formation of Citigroup in 1998 is one such example. This was formed
following the merger of Citicorp and Travelers Group. Both these firms used
to operate in the same industry, however product offerings were different for
both these firms. Before the merger and formation of Citi Group, Citicorp was
in the traditional banking services and credit card offering. And though
Travelers was in the same industry but was offering insurance and brokerage
services..
EXAMPLES
What is a Conglomerate Merger?
METI MEGHANA
De-Mergers
Spin-off and Spilt-off
De-Mergers
India bulls completed the reverse merger of India bulls’ financial services with
India bulls housing finance. The share swap ratio among the stakeholders in the two
companies was fixed at 1:1. This move enabled efficient utilization of India bulls
financials’ capital, consolidating it into the housing finance company, which
accounts for most of the incremental mortgage business.
DISINVESTMENT
DISINVESTING IS
AN EXIT
STRATEGY THAT
MEANS TAKING
OUT AN EXISTING
INVESTMENT.
DISINVESTMENT
POLICIES ARE
COMMONLY
FOLLOWED BY
GOVERNMENTS
TO ALLOCATE
RESOURCES MORE
EFFICIENTLY.
Minor Major Complete
Disinvestment Disinvestment Privatization
The alliance is a cooperation or collaboration which aims for a synergy where each
partner hopes that the benefits from the alliance will be greater than those from
individual efforts.
Typically, two companies form a strategic alliance when each possesses one or more
business assets or have expertise that will help the other by enhancing their
businesses.
Strategic alliances occur when two or more organizations join together to pursue
mutual benefits.
TYPES OF STRATEGIC
ALLIANCES:
• There are three types of strategic alliances:
1. Joint Venture
2. Equity Strategic Alliance
3. Non-equity Strategic Alliance.
1 .Joint Venture:
• A joint venture is established when the parent companies establish a new child company. For
example, Company A and Company B (parent companies) can form a joint venture by
creating Company C (child company).
• In addition, if Company A and Company B each own 50% of the child company, it is defined
as a 50-50 Joint Venture. If Company A owns 70% and Company B owns 30%, the joint
venture is classified as a Majority-owned Venture.
2 .Equity Strategic Alliance :
• An equity strategic alliance is created when one company purchases a certain equity
percentage of the other company.
For example, If Company A purchases 40% of the equity in Company B, an equity strategic
alliance would be formed.
3. Non-equity Strategic Alliance:
• A non-equity strategic alliance is created when two or more companies sign a contractual
relationship to pool their resources and capabilities together.
• Non-equity partners do not become owners of the firm they invest in, do not have full voting
rights, and are not expected to contribute capital.
• In this type of alliance, firms do not establish an independent company (joint venture) and
do not take equity positions (equity strategic alliance). This also means that non-equity
strategic alliances are less collaborative and demand fewer commitments.
Example:
1. Partnership between Starbucks and Kroger.
2. Maruti-Suzuki alliance in India.
EXAMPLE
S:
1. Strategic Partnerships between Spotify and Uber:
The alliance between Spotify and Uber is an example of a strategic alliances between two
companies. These two companies, through this alliance, increasing their customer base as they
offer uber riders to take control of the stereo.
In this way, both companies are getting an edge over their competitors. Customers of Spotify
can play their favorite playlist while riding in the Uber ride by getting the premium package of
Spotify.
• 2. Apple Pay and Master Card:
When Apple Inc. decided to get into digital payment business. It became a big competitor to
all existing companies in this field.
Rather than getting into the competition, the second-largest digital payment company
“Master Card” decided to get into an alliance with the Apple Inc. in this way, both
companies getting the benefit of the alliance.
Master Card become the first company to provide Apple Pay’s services, and Apple Pay got
the benefit of the Master Card’s reputation.
3. Google and Luxottica:
Luxottica is a leading luxury and sports eyewear company, and Google is an international
company which provides internet-based services and products. There is no way that one can
think of two such different companies getting into a business alliance with each other.
But these two companies get into an alliance to set an example in the market. With each
other’s alliance companies are both companies expanded their business by combining
technology with luxury.
4.Red Bull and GoPro:
In 2012, Red Bull partnered with GoPro to support a record-breaking skydive from a
balloon. Red Bull sponsored the dive, and the skydiver wore a GoPro camera to capture it.
The two brands later formed a long-term strategic alliance for Red Bull extreme sports
events, such as the Red Bull Rampage. Only GoPro cameras are used to capture an athlete’s
point-of-view shots at these events.
The Red Bull/GoPro strategic partnership is so successful because the brands have similar
adrenaline-seeking audiences. Thanks to this strategic alliance, both brands now have an
even stronger association with high-level thrills.
5. VODAFONE INDIA AND ICICI BANK:
The partnership between Vodafone India and ICICI Bank is a prominent strategic alliance
example.
The two organizations joined forces to launch m-pesa, a mobile money transfer and
payments service that helps customers access a wide range of offerings, including cash
deposit and withdrawal, money transfer and mobile recharge. ICICI Bank gained access to
Vodafone India’s extensive market reach. At the same time, Vodafone India utilized ICICI
Bank’s technological innovation in banking to deliver a unique offering to its customers in
the form of secure financial transactions.
FRANCHISING
DEFINITION AND
EXAMPLE
FRANCHISING DEFINITION:
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JAWED HABIBA FRANCHISE:
Jawed Habib is one of the leading hair & beauty salon chains at present in
India. The company currently operates a total of 545 outlets across 24 states
and 110 cities in the country. The company is promoted by Jawed Habib, a
renowned Hair Expert in India.
BATA:
Bata is the largest retailer and manufacturer of footwear in India and was
organised as the Bata Shoe Company Private Limited in 1931. It was the first
production plant in the Indian shoe manufacturing sector to get an ISO: 9001
certification.
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APOLLO DIGNOSTICS:
Apollo, India’s first name in corporate healthcare, ‘Good health for all’ is the
abiding focus. Recognising the need for high-quality diagnostics to nip
developing health problems in the bud, Apollo offers a wide spectrum of tests
through its hospital and clinic facilities across the Country.
To expand the offering and increase its accessibility to a wider network of
patients and doctors, Apollo Hospitals launched Apollo Diagnostics, a service
fully dedicated to providing diagnostics for all age groups.
BAJAJA AUTO:
Bajaj is a highly established prestigious two wheeler brand in India. The brand
that has been in existence for many decades now is considered highly
competitive and reliable. The Pulsar and Discover model bikes of Bajaj have
swept the market with such high tide there are no equivalent bikes till date.
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THANK YOU!
Slump sales
Meaning
slump sales for income tax purpose would be where an
undertaking is sold without considering the individual values of
the assets or liabilities contained within the undertakings
Examples of slump sales
PATANJALI : Patanjali sold its biscuits factory business to the
Ruchi Soya company for the lump sum amount of 60.2 Crore INR
JSW ACQUIRES WELSPUN CORP : JSW steels acquires high
grade steel plants from Welspun corp at 225 Cr INR on March 2021
YAHOO : Yahoo again sold to a private firm in US from its owner
Verizon for a deal of $3.6 Billion
ADANI POWER: Adani Power sells Mundra Power to its
subsidiary on a slump sale and creats Adani Power(Mundra)
1.Patanjali
Patanjali Ayurved Ltd will sell its food retail business to group firm
Ruchi Soya Industries Ltd for Rs 690 crore as part of its strategy to
focus on non-food, traditional medicine and wellness business.
Patanjali Ayurved Ltd had acquired Ruchi Soya through an
insolvency process.
In a regulatory filing, Ruchi Soya informed that it has entered into a
"Business Transfer Agreement" with Patanjali Ayurved Ltd to
acquire the food retail business of the latter as a going concern on a
slump sale basis.
2.JSW acquires Welspun corp
JSW Steel has completed the acquisition of the steel plate and
pipe business of Welspun Corp by paying the last tranche of ₹86
crore.
In April, the company had announced acquisition of high-grade
steel plates and coils business of Welspun on a slump sale basis
for ₹848 crore.
3.YAHOO
Yahoo again sold to a private firm in US from its owner Verizon
for a deal of $3.6 Billion.
After its revenues began shrinking following its peak in 2007,
Yahoo was acquired by Verizon (VZ) for $4.5 billion in 2017,
where it now operates alongside brands like HuffPost and Tumblr
under the umbrella once called “Oath”- recently retooled as
“Verizon Media.” Confusingly, Oath and Verizon Media both
currently exist, and therefore sites like Yahoo are effectively
being run by two different companies. This has lead to
disorganized management.
4.ADANI POWER
Adani Power’s plans to separate its ailing asset, the 4620 MW
coal-based power plant in Mundra, by slump sale to its
subsidiary, Adani Power (Mundra) Ltd, will take time as the
transaction has not got necessary regulatory approvals.
THANK YOU