UNIT 04

BUSINESS COMBINATION

Meaning :
Business combinations are combinations formed by two or more business
units, with a view to achieving certain common objective (specially elimination
of competition); such combinations ranging from loosest combination through
associations to fastest combinations through complete consolidations.

Definition:
L. H . Haney “To combine Is simply to become one of the parts of a whole; and a
combination Is merely a union of persons, to make a whole or group for the
prosecution of some common purposes.”

Causes of Business Combinations:

1. Elimination of Cu t throat Competition
Large-scale production and intense competition have become the rule of the
present day economy. Cutthroat competition leads to wasteful advertising,
unnecessary duplication, over production etc., which all ultimately result in
lowering the profit margin of the industrialists. Under such circumstances,
small units could not survive. There fore, the only alternative available to
the industrialists is the elimination of competition, which could be possible
only through business combination.

2. Economies of Large-scale Production

Large-sale production has certain definite advantages. If different firms
come together and for amalgamations, the scale of operational so become
larger and savings in over head charge scan be effected.

3. Influence of Tariff
The tariff policies of different countries have also furthered the ca uses of
the combination movement. Tariff is often described as the “Mother of
Combination“. By imposing high tariff on imported goods, the Governments
through out the world offered protection to home industries. The protection
offered by the state resulted in the establishment of a number of business

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 units. Consequently, competition amongthem became tense and the need
for business combination was felt.

4. Transport Revolution
Another contributory cause for the combination movement was the revolution
in transport and development of communications. The development of
transport facilities accelerated the growth of large -scale undertakings. The
large undertakings began to absorb smaller units to cater to the needs of the
local market.

5. Organizational Revolution
The growth of joint stock companies has also facilitated combinations.
Basically the company form of organization itself is a type of combination.
Large companies with huge capital were able to control comparatively small
companies by subscribing to their shares. H e n c e , holding companies came into
being.

6. Control of the Market

Another important cause for the rise of the combination movement was the
desire to control the market by regulating the output. This goal could be
achieved only through business combination.

7. Trade Cycles
The tendency of business activities to fluctuate regularly between booms and
depressions gave a fillip to business combinations. Particularly during the
periods of depression, new units cannot enter into the industry and even the
existing small and inefficient units cannot survive.
During 1930, when the Great Depression occurred, the situation became very
awkward and the industrialists began to adopt the technique of business
combination.

8. Technological Factors
The technological development also paved way for large -scale operations. Small
units with limited financial resources were found unable to compete with
bigger ones. H e n c e , they realized the need for business combination.
Moreover, the adoption of modern techniques required huge capital
investments, which small units could not provide. Therefore, they were forced
to combine themselves to get the benefits of modernization.

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9. Patent Laws
Business Combination has also been fostered by patent laws. The inventors
were given exclusive right of the use of their inventions. This statutory right
also furthered the combination movement.

10. Individual Ability

Men of technical skill of a superior order are less in number. The scarcity of
business talent is also a cause for the centralization of powers in the hands of
a few. Many combines have common directors, managers, which in effect would
m e a n their common control.

11. Policies of the Government

The labour, fiscal, industrial and taxation policies of the Governments also
influenced the formation of business combinations. The Government may even
exert pressure on weaker units to merge with bigger ones. Frequent changes in
the policie s of the Government also increased the uncertainty among the
businessmen. The instability of the economic policies also encouraged the
growth of the combination movement.

12. Rationalization
In fact, combination is the first step towards rationalization. The growth of
rationalization movement encouraged the emergence of business combinations
to a great extent.

13. Cu t of the Colossal

The mid-nineteenth century brought in its wake the cult of the colossal-respect
for bigness. People began to respect big things and there was a corresponding
contempt for small things. The impact of this tendency was felt in the business
field also. The glamour for giant undertakings captured the minds of the
industrialists. This tendency also furthered the combination movement.

Objectives of Business Combination:

The basic objective of combinations is the sustained profitable growth of the
combining enterprises. This basic objective is realized by achieving economies
of scale, reducing competition, preventing the entry of new firms and
controlling the market.

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The objectives of combinations are:
1. Achieving sustained growth and profits.
2. Reduction in competition.
3. Preventing the entry of new firms by creating entry barriers.
4. Achieving monopoly status.
5. Undertaking large scale production and benefiting from economies of
scale.
6. Investing in common facilities and infrastructure.
7. Avoiding cut-throat competition and the evils associated with it.
8. Achieving greater financial strength and stability.
9. Investing in research and development to innovate new products.
10. Pooling of material and manpower to ensure efficiency in operations.
11. Sharing knowledge of best practices for mutual benefit.
12. Maintaining stability in prices.
13. To withstand the effects of business cycles.

Types of Business Combination:

(i) Horizontal Combinations

It refers to combination of businesses engaged in the production of the same

type of product or engaged in the same trade. For e.g. C e me n t companies
joining together (acquisition of Gujarat Ambuja C e me n t by Lafarge of France) or
steel manufacturers joining together (Tata Iron and Steel Co. , acquiring
Natsteel of Singapore) etc. It is also known as parallel or unit or trade
combination.

(ii) Vertical Combinations

The Vertical combination is a combination of different stages of the same

business. For example, many businesses operate independent businesses at
different stages. This is also known as sequence combination or process
combination. It combines different departments under one single control point.
The key objective is to reduce the per-unit cost of production.

(iii) Lateral or Allied Combinations:

Lateral combination refers to the combination of those firms which

manufacture different kinds of products; though they are allied in some way.

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Lateral combination may be:

(a) Convergent lateral combination:

In convergent lateral combination, different industrial units which supply raw -
materials to a major firm, combine together with the major firm. The best
illustration is found in a printing press, which may combine with units
engaged in supply of paper, ink, types, cardboard, printing machinery etc.

(b) Divergent lateral combination:

Divergent lateral integration takes place when a major firm supplies its
product to other combing firms, which use it a s their raw material. The best
example of such combination may be found in a steel mill which supplies steel
to a number of allied concerns for the manufacture of a variety of products like
tubing, wires, nails, machinery, locomotives etc.

(iv) Diagonal (or Service) Combinations:

This type of combination takes place when a unit providing essential auxiliary
goods / services to a n industry is combined with a unit operating in the main
line of production. Thus, if a n industrial enterprise combines with a repa irs
workshop for maintaining tools and machines in good order; it will be effecting
diagonal combination.

(v) Circular (or Mixed) Combinations:

When firms engaged in the manufacture of different types of products join
together; it is known as circular or mixed combination. For example, if a sugar
mill combines with a steel works and a cement factory; the result is a mixed
combination.

Forms of Business Combinations:

By the phrase „forms of combinations ‟, we me a n the degree of combination,
among the combining business units.

Ac c ording t o Haney, c ombinat ions may t ake t he following

form s, depending on the degree or fusion among combining firms:

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 (I) Associations:
These are voluntary organization of traders and businessmen formed
to protect and promote their common interests through collective
efforts. They act as self-regulators of trading policies and practices.

Forms of Combinations, in this Category are:

(i) Trade Associations:

A trade association comes into being when business units engaged in a
particular trade or industry or in closely related trades come together for the
promotion of their economic and business interests. S u c h a n association is
organized on a non-profit basis and its meetings are used largely for a
discussion of matters affecting the common interests of members such as
problems of raw- materials, labour, tax-laws etc.
ii) Chambers of Commerce:
Chambers of commerce is voluntary associations of persons connected with
commerce and industry. Their membership consists of merchants, brokers,
bankers, industrialists, financiers etc.
Chambers of commerce is formed in the same way as associations, with the
ultimate objective of promoting and protecting the interests of business
community. But they differ from trade associations in that they do not confine
their interests only to a particular trade or industry; but stand for the business
community in a particular region, country, or even the world, as a whole.

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(iii) Informal Agreements:
Informal agreements among business magnates are often concluded secretly at
social functions like dinners or at meetings of trade associations etc. These
agreements are merely understanding among the parties and no written
documents are prepared. As they depend mainly on the honour and sincerity of
members; they are referred to as Gentlemen ‟ s agreements.

(II) Federations:
Federation me ans association of a firms engaged in the same
business with a formalized agreement to follow certain policies in
common so as to reduce the intensity of wasteful competition in the
respective
business line.
Forms of Business Combinations in this Category are:
(i) Pools:
Under the pool form of business combination, the members of a pooling
agreement join together to regulate the demand or supply of a product without
surrendering their separate entities, in order to control price.
(ii) Cartels (Kartells):
Basically cartel is the European name for the American pools. According to Von
Beckereth, “A cartel is a voluntary agreement of capitalistic enterprises of the
same branch for a regulation of the sales market with a view to improving the
profitableness of its members‟ business.”

Mergers:

A merger is the combination of two companies into one by either closing the
old entities into one new entity or by one company absorbing the other. In
other words, two or more companies are consolidated into one company.
A merger is a combination of two corporations, as a result of which one loses
its corporate entity. The surviving corporation acquires the liabilities, assets,
personnel and much of the reputation of the fusing company.
A merger is fundamentally different from a statutory consolidation in the
sense that it involves a combination of two companies, whereby a n entirely
new corporation is formed. Both the old companies cease to exist, and the
share of
their common stock are exchanged for shares in the new company.

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Examples of Mergers
•Acquisition of Modern Foods, Kissan, Tata Oil Mills Co. , Ltd (TOMCO), Kwality
Walls etc., by Hindustan Level Limited(HLL).
•Acquisition of ANZ Grindlays Indian operations by Standard Chartered, Times
B a n k by H D F C B a n k, B a n k of Madura by ICICI B a n k,
•Acquisition of Voltas and Allwyn by Electrolux. Subsequently Electrolux ‟s –
Indian operations were acquired by Videocon International.
•Recent international mergers include – acquisition of Gillette by P & G ,
Betapharma by Ranbaxy, IBM‟s P C division by Lenovo, Compaq by Hewlett
Packard(HP) etc.

Types of mergers:

The following are the types of mergers :

1) Horizontal mergers:
It refers to two firms operating in same industry or producing ideal products
combining together. For e. g. , in the banking industry in India, acquisition of
Times B a n k by H D F C B a n k, B a n k of Madura by ICICI B a n k, Nedungadi B a n k
by Punjab National B a n k etc. in consumer electronics, acquisition of
Electrolux ‟s Indian operations by Videocon International Ltd., in BPO sector,
acquisition of Da ks h by IBM, Spectramind by Wipro etc. The main objectives of
horizontal mergers are to benefit from economies of scale, reduce competition,
achieve monopoly status and control the market.
2) Vertical merger:
A vertical merger can happen in two ways. One is when a firm acquires another
firm which produces raw materials used by it. For e. g. , a tyre manufacturer
acquires a rubber manufacturer, a car manufacturer acquires a steel company,
a textile company acquires a cotton yarn manufacturer etc.
Another form of vertical merger happens when a firm acquires another firm
which would help it get closer to the customer. For e. g. , a consumer durable
manufacturer acquiring a consumer durable dealer, a n F M C G company
acquiring advertising company or a retailing outlet etc.
3) Conglomerate merger:
It refers to the combination of two firms operating in industries unrelated to
ea ch other. In this ca se, the business of the target company is entirely different
from those of the acquiring company. For e. g. , a watch manufacturer acquiring
a cement manufacturer, a steel manufacturer acquiring a software company
etc. The main objective of a conglomerate merger is to achieve i n big size.

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 4) Concentric merger:
It refers to combination of two or more firms which are related to ea ch other in
terms of customer groups, functions or technology. For eg., combination of a
computer system manufacturer with a U P S manufacturer.
5) Forward merger:
In a forward merger, the target merges into the buyer. For e. g. , when ICICI
B a n k acquired B a n k of Madura, B a n k of Madura which was the target, merged
with the acquirer, ICICI B a n k.
6) Reverse merger:
In this ca se, the buyer merges into the target and the share holders of the
buyer get stock in the target. This is treated as a stock acquisition by the
buyer.
7) Subsidiary merger:
A subsidiary merger is said to occur when the buyer sets up a n acquisition
subsidiary which merges into the target.

Takeovers:
A takeover (or acquisition) involves one business acquiring control of another
business , Takeovers (or acquisitions as they are otherwise known) are the
most common form of external growth, particularly by larger businesses. For
example: When one company purchase the most or all of the another’s
company shares to gain control of that company. Purchasing more than 50%
of targets firm stock.

Reasons for Takeovers:

There are many reasons why a firm may decide to undertake a takeover as part
of its strategy, including to:
 Increase market share
 Acquire new skills
 Access economies of scale
 Secure better distribution
 Acquire intangible assets (brands, patents, trade marks)
 Spread risks by diversifying
 Overcome barriers to entry to target markets
 Defend itself against a takeover threat
 Enter new segments of a n existing market
 Eliminate competition
Types of Takeovers :

 Reverse Takeover-Reverse takeovers or Bail Out takeover is a type of

YIASCMacquisition that helps the managers of private companies to attain
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Types of Takeovers :
 Reverse Takeover-Reverse takeovers or Bail Out takeover is a type of
acquisition that helps the managers of private companies to attain a
public company status without resorting to a n (IPO) Initial Public Offering.
 Friendly Takeover- Under this type of takeover, the acquirer company
notifies its Board of Directors about the acquisition offer before making a
direct offer to the target company. Thereon, the acquired company take the
consent of the Directors & shareholders of the target company to have a
friendly takeover.
 Hostile Takeover- A hostile takeover is a forced method of acquiring the
target company. In such a n acquisition, the management of the target
company does not agree for the merger or is reluctant to for takeover. A
takeover is referred to as hostile, if the board of the target company rejects
the acquisition offer, but the acquirer continues to pursue it.
 Backflip Takeover – A backflip takeover is one where a bidding company
becomes the subsidiary of the take-over company. The reason behind this is
to take benefit of the brand value of the taken-over company.

Key difference between Takeover and Merger:

Sl. Terms of Takeover Merger

No. Differences
1 Number Minimum 2 companies are Minimum 2 companies are
of required in which one required for a merger
Entities company takes over the wherein two companies
Involved shares or assets of the other merge together as one.
company.
2 Size of the Different sizes of companies Both companies are equal in
Companies are involved where the larger size.
company takeovers smaller
companies.
3 Transfer The acquirer company S h a re s of the
of purchases or takeover more absorbing
S h a re s than 50% shares of company are given to the
the shareholder of the absorbed
target company. company.
4 Terms Company takeover can be A merger is usually
friendly or hostile. voluntarily or friendly.

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5 Consolidation Takeover is driven by the Merger is often driven by the
acquirer company with or absorbing company.
without the consent of the
acquired company.
6 Accounting The acquirer company takes The assets and liabilities of
Treatment over all the assets and both the companies are
liabilities of the target merged and consolidated
company.

Acquisitions :
An acquisition is defined as a corporate transaction where one company
purchases a portion or all of another company ‟s shares or assets. Acquisitions
are typically made in order to take control and build on the target company ‟s
weaknesses or strengths and capture synergies. There are several types of
business combinations: acquisitions (both companies survive), mergers (one
company survives), and amalgamations (neither company survives).
The acquiring company will buy the shares of the assets of the target company,
which gives the acquiring company the powers to make decisions concerning
the acquired assets without needing the approval of shareholders from the
target company.

Benefits of Acquisitions :

1. Improves a struggling business

The business you work with may be going through a n underperforming
phase and acquisition may be a solution. An acquisition may be a n
important way to help the business thrive , as it has the opportunity to join
forces rather than operating alone. This can help to prevent the business
from failing as you get to share resources with the business to which you‟re
merging.
2. Obtain funds for development
By entering into a n acquisition, a business can have access to funds or
other valuable assets which may not be at the disposal of a standalone
business. An acquisition can help you acquire these assets with e a s e . Since
the development of the business is the ultimate goal, joining forces with a
company that h a s adequate funds can be beneficial for the business and its
employees.

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 3. Reduction production cost
Merging with another company that has the production centers, facilities
and storage space, c a n reduce your production costs if you‟re able to use
these resources. Building facilities such as these resources can be expensive
but may become necessary may have a significant impact on the production
costs and budget.
4. Access to experts
When small businesses join with larger businesses, they are able to access
specialists such as financial, legal or h u ma n resource specialists.
5. Fresh ideas and perspective
M&A helps put together a new team of experts with fresh perspectives and
ideas and who are passionate about helping the business reach its goals.
6. Market power
An acquisition will help to increase the market share of your company
quickly and reduce the competition ‟s stronghold. Even though competition
can be challenging, growth through acquisition can be helpful in reducing
the capacity of competitors and making things even. The process helps
achieves market synergies.

Challenges with Acquisitions:

M&A can be a good way to grow your business by increasing your revenues
when you acquire a complimentary company that is able to contribute to your
income. Nevertheless, M&A deals can also create some hitches and
disadvantage your business. You must put these pitfalls into consideration
before pursuing a n acquisition.

7. Culture clashes
A company usually has its own distinct culture that has been developing since
its inception. Acquiring a company that has a culture that conflicts with yours
can be problematic. Employees and managers from both companies, as well as
their activities, may not integrate as well as anticipated. Employees may also
dislike the move, which may breed antagonism and anxiety.
2. Duplication
Acquisitions may lead to employees duplicating ea ch other ‟s duties. When two
similar businesses combine, there may be cases where two departments or
people do the same activity. This can cause excessive costs on wages. These
transactions will therefore often lead to reorganization and job cuts to

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 maximize efficiencies in h u ma n resources and other processes. This can reduce
employee morale and lead to low productivity.
3. Conflicting objectives
The two companies involved in the acquisition may have distinct objectives
since they have been operating individually until the transaciton. For instance,
the original company may want to expand into new markets, but the acquired
company may be looking to cut costs. This can bring resistance within the
acquisition that can undermine efforts being made .
4. Poorly matched businesses
A business that doesn ‟t look for expert advice when trying to identify the most
suitable company to acquire may end up targeting a company that brings more
challenges to the equation than benefits. This can deny a n otherwise
productive company the chance to grow.
5. Pressure on suppliers
Following a n acquisition, the capacity of the suppliers of the company may not
be enough to provide the additional services, supplies, or materials that will be
needed. This may cripple the operations of the acquisition.
6. Brand damage
M&A may hurt the image of the new company or damage the existing brand.
An evaluation on whether the two different brands should be kept separate
must be done before the deal is made.

Sl. No. Basis Merger Acquisition

for
comparison
1 Definition The merger is a process in The acquisition is a
which more than process in which
one companies come one company takes
forward to control of
work as one. another company.
2 Terms Considered to be friendly and Considered to be hostile
planned. and sometimes
involuntary (not always)
3 Title A new name is given The acquired company
comes under the name of
the acquiring company.
4 Scenario Two or more companies that Acquiring a company is
consider ea ch other on equal always larger than
terms usually merge. the acquired company.
5 Power The power-difference is almost The acquiring company
nil between the 2 companies. gets to dictate terms.
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 6 Stocks Merger leads to new stocks In a n acquisition, there
being issued. are no new stocks issued.
7 Example Merging of GlaxoWellcome and Tata Motors acquisition of
SmithKline Beecham J a g u a r Land Rover
to GlaxoSmithKline

CO N CLU SIO N
A merger involves the mutual decision of two companies to combine and
become one entity; it can be see n as a decision made by two "equals." A
takeover, or acquisition, is usually the purchase of a smaller company by a
larger one.

STRATEGIC ALLIANCES AND JOINT VENTURES

Strategic Alliances
A strategic alliance is an agreement between two or more companies to collaborate on a project or
business objective while remaining independent organizations. These partnerships are often formed to
leverage each other's strengths and minimize risks, costs, or resources needed to achieve shared goals.

Key Features of Strategic Alliances:

•Flexibility and Independence: Each company remains legally and operationally independent. There’s
no creation of a new entity, so the companies retain their own identities and brands.
•Resource Sharing: Partners might share technology, marketing resources, or expertise to benefit from
each other’s strengths.
•Focus on Specific Goals: Alliances are often created to achieve a specific goal, like entering a new
market or co-developing a product.
•Non-Equity-Based Partnership: Often involves no shared ownership or financial investment in each
other’s companies.

Examples of Strategic Alliances:

1.Starbucks and Barnes & Noble: Starbucks supplies coffee shops within Barnes & Noble bookstores,
allowing Starbucks to expand its customer reach while Barnes & Noble enhances the in-store
experience.
2.Spotify and Uber: This partnership allows Uber riders to connect their Spotify accounts to play their
own playlists during rides. This enhances customer experience and helps both companies reach a
broader audience.
3.Nike and Apple: Nike and Apple have worked together to integrate Apple's technology into Nike’s
fitness products. The collaboration helps Nike enhance its digital presence while promoting Apple's
devices among fitness enthusiasts.

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Joint Ventures
A joint venture (JV) is a business arrangement in which two or more companies create a new, jointly owned
entity to achieve specific business objectives. The parent companies(a single company that has a controlling
interest in another company or companies) share control, profits, and losses of the joint venture, making it a
more integrated and formal structure compared to strategic alliances.

Key Features of Joint Ventures:

•Equity-Based Partnership: Joint ventures involve shared ownership of a new entity. Each partner typically
contributes capital, resources, or technology to the new venture.
•Shared Risks and Profits: Partners share in the profits, losses, and risks associated with the joint venture,
making it a deeper financial commitment.
•Defined Duration and Scope: JVs are often set up for a specific project or objective with a clear end date or
duration, although they can also be indefinite.
•Higher Level of Integration: Since a new entity is created, a joint venture often involves greater
coordination and alignment on management, operations, and decision-making.

Examples of Joint Ventures:

1.Sony Ericsson: Sony and Ericsson created Sony Ericsson to combine Sony’s expertise in consumer
electronics with Ericsson’s knowledge of mobile communications, allowing them to compete better in the
mobile phone market.
2.MillerCoors: The two American beer companies, Molson Coors and SABMiller, formed a joint venture,
MillerCoors, to streamline production and distribution, cutting costs while expanding their reach in the
competitive beer industry.
3.Microsoft and General Electric (Caradigm): Microsoft and GE formed Caradigm to focus on health IT
solutions, combining GE’s healthcare knowledge with Microsoft’s expertise in technology.

DIFFERENCE BETWEEN STRATEGIC ALLIANCE AND JOINT VENTURE

Feature Strategic Alliance Joint Venture

No new entity; companies New legal entity jointly owned
Structure
remain separate by partners
Typically none; non-equity Shared ownership (equity-
Equity Ownership
arrangement based)
Less shared financial risk and Shared risk and profit through
Risk and Profit Sharing
profit the JV
Less integration; often a High integration within the JV's
Level of Integration
contractual agreement operations
Typically project-specific or
Duration Can be flexible and short-term longer-term, depending on
objectives
 CORPORATE RESTRUCTURING TECHNIQUES
Corporate restructuring is the process through which a company reorganizes its structure, operations, or
finances to improve efficiency, competitiveness, and overall value. This can involve changes to the
ownership structure, assets, or operational strategies to address financial difficulties, adapt to market
changes, or prepare for growth. Here’s a breakdown of key restructuring techniques, examples, and
strategies:
1. Types of Corporate Restructuring
A. Financial Restructuring
Financial restructuring involves changes to a company’s capital structure, such as debt refinancing, equity
issuance, or asset sales, often to improve liquidity or reduce financial burdens.
•Examples:
• Debt Restructuring: A company negotiates with creditors to reduce or delay debt repayments.
• Equity Financing: A company raises funds by issuing additional shares to investors.
• Asset Sale: Selling non-core assets to generate cash or reduce liabilities.
B. Operational Restructuring
Operational restructuring focuses on streamlining business processes, reducing costs, and improving
efficiency. This can involve reducing the workforce, closing underperforming facilities, or outsourcing non-
core activities.
•Examples:
• Layoffs or Workforce Downsizing: Reducing staff to lower payroll expenses.
• Facility Closures: Shutting down operations in regions with high costs or low demand.
• Outsourcing: Transferring non-core operations (e.g., IT support, payroll) to third-party
providers.
C. Organizational Restructuring
Organizational restructuring modifies a company’s internal hierarchy, management structure, or reporting
lines to improve communication, decision-making, and resource allocation.
•Examples:
• Flattening Hierarchies: Reducing management levels to streamline decision-making.
• Division Creation or Removal: Adding or dissolving divisions to focus on core areas.
• Merging Business Units: Combining similar business units to improve collaboration.
D. Divestiture
Divestiture is the sale, spin-off, or liquidation of certain business units or subsidiaries to focus on core
activities or raise funds.
•Examples:
• Asset Sales: Selling real estate, patents, or other non-core assets.
• Spin-Offs: Creating a new, independent company from an existing division or business unit.
• Equity Carve-Out: Selling a portion of a subsidiary’s shares in the public market.
E. Mergers and Acquisitions (M&A)
M&A involves the consolidation of companies, either by merging them into one entity or through the
acquisition of one company by another. This can create synergies, reduce competition, or allow entry into
new markets.
•Examples:
• Horizontal Mergers: Combining two companies in the same industry to increase market share.
• Vertical Mergers: Merging with a supplier or distributor to streamline the supply chain.
• Acquisition: Purchasing another company to diversify products or enter a new market.
 Corporate Restructuring Techniques

Technique 1: Mergers and Acquisitions (M&A)

•Description: M&A is used to consolidate market power, expand product offerings, or acquire key
resources like talent and technology.
•Examples:
• Disney and Pixar: Disney acquired Pixar to strengthen its animation division and access
Pixar’s creative talent.
• Amazon and Whole Foods: Amazon acquired Whole Foods to enter the physical grocery
market.

Technique 2: Divestitures and Spin-Offs

•Description: Divestitures involve selling or spinning off parts of the business that don’t align with the
company’s core strategy.
•Examples:
• eBay(online market place) and PayPal(digital payment platform): eBay spun off PayPal to
allow each entity to focus on its core business .

Technique 3: Debt Restructuring

•Description: Debt restructuring adjusts debt obligations to alleviate financial pressure, often
negotiated with creditors to extend terms or reduce interest rates.
•Examples:
• General Motors (2009): Filed for bankruptcy and renegotiated(reconsult,rework)debt to
improve financial stability.

Technique 4: Equity Restructuring

•Description: Changes to the equity structure, such as issuing more shares, conducting stock splits, or
buying back shares to adjust capital.
•Examples:
• Tesla Stock Splits: Tesla split its stock to make shares more affordable to retail investors,
boosting its market appeal.

Technique 5: Organizational Restructuring

•Description: Altering internal structures like hierarchy, reporting lines, or business units to improve
agility and operational focus.
•Examples:
• Google to Alphabet: Google restructured to create Alphabet, separating Google’s main
business from its other projects.