Restructuring of Business

Nivedita R. Sarda, AdvocateVEDANTA LAW CHAMBERS

What is restructuring?

1980’s: corporate restructuring identified with leveraged buyouts, LBO’s, LCO’s More generally, however, divestitures, carve out

IPO’s, spin offs, etc. Early 1990’s: corporate restructuring

identified with troubled debt restructuring: workouts and reorganization

Impetus for restructuring Stock market

Activist shareholders Pension funds

Increasing competition Global Technological

Change in regulation

Impetus for Restructuring -II Achieve growth and survive

Gain Better Competitive Position Focus on core activities Achieve economies of scale.

Funds Raising Utilization of Excess cash DDT minimization Tax Planning & Cost reduction

Other Reasons Bail out takeover Diversification Family Separation Warding- off Predators

Restructuring hexagon

Operating improvementIncentives management with VBM

Divestiture activity, spin offs

Slightly modified from the McKinsey book.

Financial engineering: leverage, dual class stock, carve outs, tracking stock, employee ownership, debt restructuring

Information gap

Dimensions of restructurings

Asset restructuring Acquisitions Divestitures Spin offs Corporate downsizing Outsourcing

Dimensions of restructuring, II

Restructuring ownership structure, leverage Exchange offers Share repurchases LBO’s, LCO’s

Restructuring equity claims (next slide)

Restructuring equity claims

Inside vs. outside equity ownership MBO’s, LCO’s ESOP’s, Employee buyouts Active investors, institutional blockholders

Restructuring equity claims IPO Spin off, carve out IPO, letter stock

Dimensions of restructuring, III

Ownership vs. control Conversion to Company Limited partnerships Leasing Joint ventures Securitization Project finance

Incentive restructuring Value based management programs (EVA, etc.)

Dimensions of restructuring, IV Corporate control

Buy Back Antitakeover amendments Dual-class recapitalizations Greenmail/Standstill agreements Poison pills/Charter amendments Defensive asset/ownership restructurings

Distress related restructuring

Troubled debt restructuring Workouts Bankruptcy BIFR reorganizations Liquidations

Conclusions Building a public equities market is a long

term proposition Start early - other markets are growing Build domestic base Establish an IPO track record

Targeted private equity can be used effectively to provide capital and enhance corporate governance

Structure for growth

Contact details

Nivedita R. Sarda, AdvocateVedanta Law Chamber

505, Fourth Floor, Apex Mall,Tonk Road, Jaipur - 302004