corporate restructuring strategic forms, financing methods
TRANSCRIPT
4/9/2015 1
RESTRUCTURING Business capacity or portfolio
•Capital structure •Ownership and/or Control
Disinvesting from non profitable business
`
Disinvesting from non core business
`
Lack of innovation & growth in core business activities `
Aiming for survival in market competition
`
TRAITS OF A POTENTIAL COMPANY CONVERGE IN
MARKET OPERATIONS
Growth Balanced
D/E Ratio
Strong Innovation/ portfolio
1
2
3
1 Improved D/E Ratio
2* ROCE ; ROE ; ROIC
Decision making
Organization structure
Corporate Restructuring - Strategic Forms & Financing Methods
Policy framing
1 Product / service improvements
2 New product/service lines
Debt Restructuring
Corporate Restructuring
Bridge loans/Borrowed Funds/ Depository receipts
WACC
* Return on Capital Employed , Return on Equity Weighted Average Capital Cost
3
Financial / Portfolio Restructuring
4/9/2015 2
•Internal accruals* •IPO/FPO •Rights issue •PE Funds/ Private placement •ADR /GDR / FCCB**
•Bank Loans – Long term & bridge •Deferred credit •External commercial borrowings
Promoter & Promoter group
Acquirer company (A)
Target company (T)
Listed equity shares Preference shares Secured debt instruments Cash Bank guarantee
Debt borrowing funds (BF)
Equity investments method
Source of funds & Methods of raising capital
Assets Liabilities Loans & Advances Other business capital
aAa B
xXx Y
C
Z
Subsidiaries Holding
Subsidiaries Holding
Funds for Restructuring
Merger
LBO (Leveraged Buyout)
Acquisition (Control of management
Decisions)
#Professional Management
Institution
Consolidation
Voting rights Direct /proxy statements Via Attorney
Investment /Holding company Controlling interest > 75%
Direct
Indirect
Target (T) company
Direct
Indirect
Target company
(A) Acquirer
OP
EN O
FFER
::
MA
NA
GER
TO
OP
EN O
FFER
Target company
(A) Acquirer
Transfer from (T) to (A)
Company 1
Company 2 + Entirely new
Company
Target company
(A) Acquirer
JOINT VENTURE
SEBI Registered Merchant Banker
AMALGAMATION
(A) Acquirer
Entirely new Company
Shareholders (T) or (A) (Institutional / others)
* For domestic acquisitions only ** For International acquisitions only # External to the organization , $ Management buyout
Buy /Sell
… Continued
SPV (Special purpose vehicle)
Establishes
Borrowed Funds (BF)
+
Indirect
$MBO
Stock Exchange Registered with SEBI
Gets delisted if listed but legal status of (T) prevails
BEFORE AFTER
Target company
Mezzanine finance
De listed
Co
nfi
rms
Utilizes the funds for Restructuring before issuing open offer
Utilizes target company assets, portfolio
METHOD/S
4/9/2015 3
OP
EN O
FFER
:: M
AN
AG
ER T
O O
PEN
OFF
ER
BUY BACK
1
2
3
Tender
• Book building • Stock Exchange
Odd lots
PAYMENT METHOD
Free & General reserves Securities premium account
Proceeds of the shares – preferential or equity
Cash Bank guarantee
• Resolution (General / Special /Board) • *Public announcement (PA) • Draft letter of offer • Payment of the consideration
• Resolution (General / Special /Board) • *Public announcement • Draft letter of offer • Payment of the consideration
(A) Acquirer
Stock Exchange
SEBI
Compliance officer
(T) Target
company
Disclosure Disclaimer clause Transaction dates & Buyback ratios
The Escrow Account & Status EQUITY CAPITAL RECORD IN % Minimum of 25% of equity capital payment consideration Balance of 10% equity capital payment consideration
CONDITIONS If the Buy Back Open Offer is withdraw then One third to Target company management One third to SEBI investor protection fund One third distributed to shareholders of target company
FUNDS FOR BUYBACK Commercial bank cash deposit Bank guarantee Deposit of approved securities
… Continued
Shareholders (T) or (A) (Institutional / others)
Opened by (A)
Co
ntr
olle
d b
y M
an
ag
er t
o o
pen
off
er
English / Daily newspaper
(T) Shareholders
Final letter
Verified by the manager
SEBI / Stock Exchange Guidelines to corporate operations
SEBI Registered *Merchant banker
Rea
liza
tio
n o
f
pro
ceed
s O
f sa
le o
f se
curi
ties
Ba
nk
cheq
ue
or
DD
Va
lid u
p t
o 1
mo
nth
a
fter
clo
sure
of
off
er
Within 7 days after resolution
Date of resolution
Within 5 working days after PA
• Resolution (General / Special /Board) • *Public announcement • Draft letter of offer • Payment of the consideration
Within 7 working days after filing draft letter of offer
``
Verify the payment consideration
Status indicates the Extent of restructuring & operations
* Manage to open offer & makes the public announcement Varies for different cases as below 1. Shares /voting rights in a negotiated “Block Deal” 2. Private placemen in market 3. Shares/Voting rights in preferential allotment 4. FCCB/DR (depository receipts)
Same as in 1