Building on Synergies:Analysis on Corporate Restructuring

Abstract

Corporate Restructuring has become an integral part of the current economic paradigm. Rationalization and Reorganisation are a necessary concomitant to realize the synergies of restructuring a business. All restructuring mechanisms were ultimately aimed at one goal, to increase wealth for all the other stakeholders in addition to the shareholders.

Restructuring is adopted, either, by companies in trouble who need to revive their business from sickness or by successful companies, who want to keep their competitive edge. Companies are prompted to restructure in the event of a fall in their share value or to achieve a higher rank in their market share position and thereby to stay ahead in the-race. The corporate restructure takes any of the various forms likfe, business combinations, acquisitions, mergers, spin-offs, divestitures and demergers.

The post liberalization era had seen a tremendous increase in mergers and acquisitions from 15 in 1990s to 450 in 1996 and in the first six months of 2006 alone there had been 358 deals valued at over Rs.63,000 crores. This drastic increase has poised for a profitable, scalable and sustainable growth in the Indian economy, not the least, with the experience of post merger takeover traumas, operational bottlenecks, and dismal performances in few cases.

The paper attempts to discuss on the growth of Mergers and Acquisitions over a decade and the transitional problems faced by the acquired companies in context with taking into account, a few companies as case examples. Corporate Restructuring is an eclectic field, which calls for expertise in varied areas of accounting, strategy, taxation, law, human resources and others. The paper also highlights on the importance of due diligence in fixing the target price of the acquired company in the event of post merger.