Mergers, Acquisitions and Restructuring - Part 1

What It Changes: Business portfolio, divisions, processes, manpower; Typical Tools: Divestiture, spin-off, BPR, headcount rationalisation, plant closure

What It Changes: Capital structure, debt profile, equity ownership, cross-holdings; Typical Tools: Debt/equity swap, debt loading (LBO), rights issue, bond buy-back, CDR/IBC route

Essence: Two or more similar businesses go into liquidation and a NEW company is formed to take over; Surviving Entity?: None (both wound up); New Entity Created?: Yes

Essence: A combination of two or more companies into an EXISTING one; all except one lose their identity; Surviving Entity?: One (the absorber); New Entity Created?: No

Essence: All companies are legally dissolved and a brand-new entity takes over assets, liabilities and shares; Surviving Entity?: None; New Entity Created?: Yes

Essence: One company acquires ownership of another; control and name pass to the acquirer; Surviving Entity?: The acquirer; New Entity Created?: No

Essence: Acquisition of a controlling stake (typically 50%+); does not dissolve the target; Surviving Entity?: The target (under new control); New Entity Created?: No

Essence: Opposite of merger — split of a company into two or more parts (e.g., Hero Honda Hero MotoCorp + Honda Motorcycle & Scooter India in 2010); Surviving Entity?: Both/all parts; New Entity Created?: Yes (the demerged unit)