5. Corporate restructuring

christian.mogste
Mind Map by christian.mogste, updated more than 1 year ago
christian.mogste
Created by christian.mogste almost 4 years ago
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Masters ACF Mind Map on 5. Corporate restructuring, created by christian.mogste on 04/11/2016.

Resource summary

5. Corporate restructuring
1 Overview
1.1 1. Asset restructuring
1.2 2. Equity and liability restructuring
1.3 3. Financial effect of corporate restructuring
2 1. Asset restructuring
2.1 1.1 Framework for corporate restructuring
2.1.1 Quickly adapt
2.1.2 Divestures
2.1.2.1 Spin offs
2.1.2.1.1 Split offs
2.1.2.1.1.1 Equity carve out
2.1.2.1.1.1.1 Parent sell shares of proportion of assets and maintains controll
2.1.2.1.1.1.2 Tracking stock
2.1.2.1.1.1.2.1 Liquidation
2.1.2.1.1.1.2.1.1 Dual class
2.1.2.1.1.1.2.1.1.1 A : Voting rights
2.1.2.1.1.1.2.1.1.1.1 B: Dividend
2.1.2.1.1.1.2.1.1.2 MBO/LBO/MBI
2.1.2.1.1.1.2.1.1.2.1 Going private
2.1.2.1.1.1.2.1.1.2.2 MBO: Managers of company bus it
2.1.2.1.1.1.2.1.1.2.3 MBI: Managares buys another company
2.1.2.1.1.1.2.1.1.2.4 Financed by debt
2.1.2.1.1.1.2.1.2 Close down of subsidiary
2.1.2.1.1.1.2.1.3 Asset distributed along creditors and equity holders
2.1.2.1.1.1.2.2 Common stocks issued b parent that only tracks this division
2.1.2.1.1.2 Parent shareholders receive stock in the new company in exchange for the parent shares
2.1.2.1.2 Shares in assets created and distributed to shareholders
2.1.2.2 Sale of portions of a firm
2.1.2.2.1 Seller perspective: Focus
2.1.2.2.1.1 Buyer perspective: Strategic
2.2 Rationale
2.2.1 Financial
2.2.1.1 Regain financial health
2.2.1.1.1 Redue leverage
2.2.1.1.1.1 Return cash to shareholders
2.2.1.1.1.1.1 Adding value

Annotations:

  • Sell assets to somebody who can use it better
2.2.1.1.1.1.1.1 Tax gains
2.2.1.1.1.1.1.1.1 Large additional investment required
2.2.1.1.1.1.1.1.1.1 Harvesting past sucess
2.2.1.1.1.1.1.1.1.1.1 MBO
2.2.1.1.1.1.1.1.1.1.1.1 Reversing mistakes

Annotations:

  • Following failed attempt to diversify
2.2.1.1.1.1.1.1.1.1.1.1.1 Profitability
2.2.2 Strategic
2.2.2.1 Strategic
2.2.2.1.1 Adjust to changing environment
2.2.2.1.1.1 Dismantling conglomerates
2.2.2.1.1.1.1
2.2.3 Legal
2.2.3.1
3 2. Equity and liability restructuring
3.1 Buy back shares
3.2 Issue new debt
3.3 Refinancing
4 3. Financial effects of corporate restructuring
4.1 Balance sheet effects
4.2 Positive market reactio
4.2.1 Short term market reaction
4.2.1.1 Long term market reatiocn
4.2.1.1.1 76 % 3-year mean return
4.2.1.2 Divestment: 1-2% announcemnet date
4.2.1.3 Spin offs: 3-5% on announcement date
4.2.1.4 Equity carve out:2-3%
4.2.2 Rationale
4.2.2.1 Cash availability
4.2.2.1.1 Market values focused companies
4.2.2.1.1.1 Remaining asset used more efficiently
4.2.2.1.1.1.1 Overcome tax and regulatory constraint
4.2.2.1.1.1.1.1 Reduce gearing and regain financial health

Annotations:

  • Leverage goes down --> beta goes down --> cost of capital goes down -- > price goes up.
4.2.2.1.1.1.1.1.1 Signal

Annotations:

  • Divestment: Signal financial distress Spin-offs: Signal focus
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