Restructuring is the corporate management term often used for the act of rearranging the legal, ownership, operational, or other structures of an organization for the rationale of making it more beneficial, or efficient. Corporate restructuring permits companies to deal with less efficient units, adopt new strategic opportunities, and achieve credibility in the capital market.
Corporate restructuring has increasingly become an indispensable part of any business and a common occurrence around the world. Many companies across the world have restructured their divisions, restructured their assets, and modernized their operations in a bid to stimulate the company's performance. It has enabled numerous organizations to react rapidly and more effectively to new opportunities and unexpected pressures. The following are the restructuring tools commonly adopted by the corporates in India:
Merger: A business strategy where two or more business entities are merged into one either by way of absorption or amalgamation or by forming a new company. The merger of two or more business entities is commonly done by the exchange of securities between the buying and the selling company.
Demerger: A business strategy in which a single business is fragmented into components, either to operate on their own, to be sold, or to be dissolved. A de-merger permits a large company, such as a conglomerate, to split off its various brands to invite or prevent an acquisition, to raise capital by selling off components that are no longer part of the business's core product line, or to create separate legal entities to handle different existing operations
Disinvestment: When a large corporate entity sells out or liquidates an asset or subsidiary, it is known as disinvestment.
Joint Venture: Under this strategy, an organization is formed by two or more companies to undertake financial acts together. The organization created is called the Joint Venture wherein both the two entities partner on every expenditure, profits & the leadership of the organization.
Slump sale: Under this strategy, an entity sells its one or more undertaking for lump sum consideration irrespective of the individual values of the assets or liabilities of the undertaking.
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