Corporate Restructuring Practice Flashcards

A set of vocabulary flashcards covering the definitions, symptoms, types, and mechanisms of corporate restructuring based on the lecture transcript.

Corporate Restructuring

Any change in a company’s capital structure, operations, or ownership that is outside its ordinary course of business.

Business Restructuring

A conscious effort to restructure policies, programmes, products, processes and people to serve redefined goals on a sustainable basis.

Operational Symptoms

Indicators for restructuring such as continuously reducing employee productivity, high employee turnover, and delays in supply chain and distribution chains.

Strategic Symptoms

Indicators for restructuring such as a slowed down desire for perpetual growth, mismatch between strategy formulation by owners and managers, and declining market leadership.

Financial Symptoms

Indicators for restructuring such as increasing operating costs, falling share prices without near-future correction scope, and declining earning ratios.

International Symptoms

Indicators such as substantial changes in government policies regarding tariffs or taxes, sustained recession, or cheaper funds availability in international markets.

Expansion

A form of restructuring resulting in an increase in firm size, occurring through mergers, acquisitions, tender offers, asset acquisitions, or joint ventures.

Merger

A combination of two or more companies into a single company.

Amalgamation

A type of merger involving the fusion of two or more companies of equal size where they lose their individual identity and a new company originates.

Acquisition

A corporate action where an acquiring company makes a bid for an acquiree; if publicly traded, the offer is made for outstanding shares.

Absorption

A type of acquisition involving the fusion of a small company with a large company, where the smaller company ceases to exist after the merger.

Joint Venture

Cooperation between two or more companies to achieve a specified business goal, typically limited to a single project and terminated upon completion.

Tender Offer

A public, open invitation by a prospective acquirer to stockholders of a publicly traded corporation to tender their stock for sale at a specified price and time.

Asset Acquisition

A buyout strategy where key tangible or intangible assets of a target company are purchased instead of its shares; often used for bankrupt companies.

Contraction

A form of restructuring that results in a reduction in the size of the firm.

Spin-off

When a company distributes all subsidiary shares it owns to its own shareholders, creating two separate public companies with same proportional equity ownership.

Split Off

A restructuring where a new company takes over a division and specific shareholders exchange parent company stock for stock in the new subsidiary.

Split up

A process where the entire firm is broken into a series of spin-offs, the parent company is dissolved, and only the offspring entities survive.

Divestitures

The sale of a portion of a firm to an outside party, generally resulting in an infusion of cash to the parent company.

Equity Carve Out

When a parent company sells a portion of its subsidiary holdings to the public while maintaining majority control, replacing the investment asset with cash.

Corporate Control

The process by which managers influence other organization members to implement organizational strategies, often involving management control changes.

Takeover Defences

Efforts classified as pre-bid (preventive) or post-bid (active) used by target companies to fend off unwanted hostile bids.

Share Repurchases

When a company buys back its own stock to reduce asset totals, increase price per share, or utilize surplus cash.

Proxy Fights

A situation where the acquirer and target company use solicitation methods to influence shareholder votes for Board of Director members.

Exchange Offer

A right or option for security holders to exchange their holdings for a different class of securities to enhance or reduce leverage.

Leverage Buyout (LBO)

An asset purchase where the buyer uses a significant amount of debt and very little equity capital for the acquisition payment.

Going Private

The repurchasing of all of a company’s outstanding stock by employees or private investors so that it stops being publicly traded.

Employee Stock Option Plan (ESOP)

An option giving directors or employees the right to purchase or subscribe to company securities at a future date at a predetermined price.