Chp 7 Mergers and Acquisitions part 2 (Restructuring (Restructuring…
Chp 7 Mergers and Acquisitions part 2
A strategy through which a firm changes its set of businesses or financial structure
Failure of an acquisition strategy often precedes a restructuring strategy.
Restructuring may occur because of changes in the external or internal environments.
A reduction in the number of a firm’s employees and sometimes in the number of its operating units.
May or may not change the composition of businesses in the firm’s portfolio.
Expectation of improved profitability from cost reductions
Desire or necessity for more efficient operations
A divestiture, spin-off or other means of eliminating businesses unrelated to a firm’s core businesses.
A set of actions that causes a firm to strategically refocus on its core businesses.
May be accompanied by downsizing, but not the elimination of key employees from its primary businesses.
Results in a smaller firm that can be more effectively managed by the top management team.
A restructuring strategy whereby a party buys all of a firm’s assets in order to take the firm private.
Significant amounts of debt may be incurred to finance the buyout, followed by an immediate sale of non-core assets to pare down debt.
Can facilitate entrepreneurial efforts and strategic growth
Can correct for managerial mistakes
Managers making decisions that serve their own interests rather than those of shareholders
For outcomes of restructuring, refer to exhibit 1 in Appendix 2