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Chapter 10.docx

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University of Calgary
Management Studies
MGST 391
Ahmad Ali Sohrabi

Chapter 10 : Corporate Reorganisation Defensive Strategies Capital Restructuring Scheme “ A capital reconstruction scheme is a scheme whereby a company reorganizes its capital structure”. Procedure of designing a capital restructuring scheme: 1. Calculate what each party’s position would be in a liquidation 2. Assess possible sources of finance 3. Design the reconstruction 4. Assess each party’s position as a result of the reconstruction 5. Check that the company is financially viable. Exit strategies for a venture capitalist: 1. Sale of shares to public or institutional investors following a flotation 2. Sale of shares to another company 3. Sale to company itself or its owners 4. Sale to institution management Downsizing Divestment- (selling of business) “Divestment is a proportional or complete reduction in ownership stake of an organization” e.g.  Demerger  Sell off  Liquidation  Spin off  Management Buy Out (MBO)  Privatization Reasons for Divestment:  To concentrate on a particular part of business  Selling a loss making unit  Liquidity problems  Selling a subsidiary with high risk  Selling a subsidiary at profits  Provide an exit route for investors  Remove value gaps to avoid takeover Demerger is splitting up of a corporate body into two or more separate and independent bodies. Sell off is a form of divestment involving the sale of a part of a company to third party usually another company. Liquidation is extreme form of liquidation where the entire business is sold and funds are distributed to shareholders in their proportion. Management Buy Out. (MBO) management buyout is the purchase of all or part of a business from its owners by its managers. Management Buy Out.(MBI) where
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