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5098498
5. Corporate restructuring
Description
Masters ACF Mind Map on 5. Corporate restructuring, created by christian.mogste on 11/04/2016.
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Mind Map by
christian.mogste
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Created by
christian.mogste
about 8 years ago
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Resource summary
5. Corporate restructuring
Overview
1. Asset restructuring
2. Equity and liability restructuring
3. Financial effect of corporate restructuring
1. Asset restructuring
1.1 Framework for corporate restructuring
Quickly adapt
Divestures
Spin offs
Split offs
Equity carve out
Parent sell shares of proportion of assets and maintains controll
Tracking stock
Liquidation
Dual class
A : Voting rights
B: Dividend
MBO/LBO/MBI
Going private
MBO: Managers of company bus it
MBI: Managares buys another company
Financed by debt
Close down of subsidiary
Asset distributed along creditors and equity holders
Common stocks issued b parent that only tracks this division
Parent shareholders receive stock in the new company in exchange for the parent shares
Shares in assets created and distributed to shareholders
Sale of portions of a firm
Seller perspective: Focus
Buyer perspective: Strategic
Rationale
Financial
Regain financial health
Redue leverage
Return cash to shareholders
Adding value
Annotations:
Sell assets to somebody who can use it better
Tax gains
Large additional investment required
Harvesting past sucess
MBO
Reversing mistakes
Annotations:
Following failed attempt to diversify
Profitability
Strategic
Strategic
Adjust to changing environment
Dismantling conglomerates
Legal
2. Equity and liability restructuring
Buy back shares
Issue new debt
Refinancing
3. Financial effects of corporate restructuring
Balance sheet effects
Positive market reactio
Short term market reaction
Long term market reatiocn
76 % 3-year mean return
Divestment: 1-2% announcemnet date
Spin offs: 3-5% on announcement date
Equity carve out:2-3%
Rationale
Cash availability
Market values focused companies
Remaining asset used more efficiently
Overcome tax and regulatory constraint
Reduce gearing and regain financial health
Annotations:
Leverage goes down --> beta goes down --> cost of capital goes down -- > price goes up.
Signal
Annotations:
Divestment: Signal financial distress Spin-offs: Signal focus
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