Audit and Assurance

What are some Different types of Corporate Restructuring Strategies?

March 25, 2021 Comments Off on What are some Different types of Corporate Restructuring Strategies?

Corporate Restructuring can help a company to stay afloat and conduct its business in a more efficient and profitable manner. In layman’s terms, corporate restructuring is to make a change in the way the business is conducted. It can either be a change in the financial structure of the business or a change in the organizational structure of the business. either way, the business will be able to perform more effectively and efficiently and will use comparatively fewer resources to conduct business.

Some of the Corporate Restructuring Strategies in use by businesses are:

  1. Mergers

This is one of the most common Corporate Restructuring Strategy. In this, two or more companies merge either by the method of amalgamation or by the method of ingestion. There is a bifurcation in this kind or restructuring strategy.

  1. Demerger

This is a process in which the business which has already merged but is not properly compatible are then separated. This is mostly because of the reason that the management of the two parties has different ideas about how to conduct business. a demerger can also be caused to sell the entity to a third party.

  1. Turn around Merger

A turn around merger is a process or situation in which the IPO (Initial Public Offer) is not decided but still, the company can be turned from an unlisted open organization to a recorded open organization. This decision will show its effect during the Accounting process.

  1. Dis-investment

This is a fairly simple corporate restructuring strategy. In this a corporate sells or exchanges an entity or a part of the entity to another party. This process is also known as “Divestiture”. In this process or strategy, the newly acquired assets of the company are periodically examined to determine which of the assets are compatible with the company and can be used to produce maximum profits.

  1. Acquisition or Takeover

This means having a controlling interest in an entity. One of the business entity needs to either buys out a company or needs to buy at least fifty-one per cent (51%) shares of the company. If the entity buys out the company, then such a situation will be termed as an acquisition but if the entity acquires 51% of shares of the company then this will be termed as a takeover.

  1. Joint Venture (JV)

A joint venture is a kind of strategy where two or more interested parties come together to handle a particular situation. This means that two or more parties share expenses, costs, incomes, control etc. in a joint venture the resources of the parties coming together are pooled and are used for one common goal. Special care is taken that it is not possible for one of the parties on the joint venture to control all the business activities.

  1. Business Alliance or Strategic Alliance

The alliance means that in order to fulfil the required two or more parties get together as they have similar goals. Similarly, in business when two or more parties come together as they have aligned goals it is called a Business Alliance or a Strategic Alliance. The important objective behind going through an alliance is to share technology, reduce cost, and achieve greater access to the markets. The two entities come together to help each other out and to increase the synergy.

  1. Slump Sale

Slump sale is a strategy of corporate restructuring where an undertaking or a part of the undertaking is sold for some fixed amount of consideration. Here instead of taking the individual value of the assets, the value which has been decided by both the party is considered. For a slump sale to happen both parties require to be on the same page.

Mentioned above are some of the more common Corporate restructuring strategies for a company. there are many other strategies too but the above are some of the more common ones. These require an in-depth knowledge of the company and thus should not be performed without assistance from a professional. This professional will help in deciding which strategy will be best suited for your company.

If you are looking for professionals which will help in deciding the type of strategy best suited for your company, then you can have a look at the services of JAXA Chartered Accountants. For details on the other services provided by JAXA, feel free to Contact Us. We will be happy to help you.