Corporate
restructuring
CHAPTER I
Forms of restructuring
Merger: A merger is an agreement that unites two existing
companies into one new company. There are several types of
mergers and also several reasons why companies complete
mergers.
Mergers are a way for companies to expand their reach, expand
into new segments, or gain market share.
A merger is the voluntary fusion of two companies on broadly equal
terms into one new legal entity.
The five major types of mergers are conglomerate, congeneric,
market extension, horizontal, and vertical.
https://www.youtube.com/watch?v=sTttm39gfMU
Type of Merger
Conglomerate
This is a merger between two or more companies engaged in unrelated business activities. The firms may
operate in different industries or in different geographical regions. A pure conglomerate involves two
firms that have nothing in common. The Walt Disney Company merged with the American Broadcasting
Company (ABC) in 1995.
Con-generic
A congeneric merger is also known as a Product Extension merger. In this type, it is a combining of two or
more companies that operate in the same market or sector with overlapping factors, such as
technology, marketing, production processes, and research and development (R&D). A product
extension merger is achieved when a new product line from one company is added to an existing
product line of the other company. An example of a congeneric merger is Citigroup's 1998 union with
Travelers Insurance, two companies with complementing products.
Market Extension
This type of merger occurs between companies that sell the same products but compete in different
markets. Companies that engage in a market extension merger seek to gain access to a bigger market
and, thus, a bigger client base.
Horizontal
A horizontal merger occurs between companies operating in the same industry. The merger is typically
part of consolidation between two or more competitors offering the same products or services.
Vertical
When two companies that produce parts or services for a product merger, the union is referred to as
a vertical merger. A vertical merger occurs when two companies operating at different levels within the
same industry's supply chain combine their operations.
Acquisition
An acquisition is when one company purchases most or all of
another company's shares to gain control of that company.
Purchasing more than 50% of a target firm's stock and other assets
allows the acquirer to make decisions about the newly acquired
assets without the approval of the company’s other
shareholders. Acquisitions, which are very common in business, may
occur with the target company's approval, or in spite of its
disapproval. With approval, there is often a no-shop clause during
the process.
Takeover
A takeover occurs when one company makes a successful bid to
assume control of or acquire another. Takeovers can be done by
purchasing a majority stake in the target firm. Takeovers are also
commonly done through the merger and acquisition process. In a
takeover, the company making the bid in the acquirer and the
company it wishes to take control of is called the target.
https://www.youtube.com/watch?v=DATnkEEgPkg
In this the company bidding will approach the director of the other
Company to discuss the offer before proposing the shareholders
The acquirer makes a direct offer to the shareholders of the
Company Without consent of the management or promoter
It is a takeover of a financially sick company by a financially
Rich company as per the sick Industrial companies act 1985.
It happens when a private company Buys a publicly traded
company as a Means of acquiring public status
