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Corporate Restructuring

Corporate Restructuring. EMP 51 Timothy A. Thompson. What is restructuring?. 1980’s: corporate restructuring identified with leveraged buyouts, LBO’s, LCO’s More generally, however, divestitures, carve out IPO’s, spin offs, etc.

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Corporate Restructuring

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  1. Corporate Restructuring EMP 51 Timothy A. Thompson

  2. What is restructuring? • 1980’s: corporate restructuring identified with leveraged buyouts, LBO’s, LCO’s • More generally, however, divestitures, carve out IPO’s, spin offs, etc. • Early 1990’s: corporate restructuring identified with troubled debt restructuring: workouts and reorganization

  3. Impetus for restructuring • Stock market • Activist shareholders • Pension funds • Increasing competition • Global • Technological • Change in regulation

  4. Restructuring hexagon Slightly modified from the McKinsey book. Information gap Current Market Value Optimized firm value Value status quo Operating improvement Incentives management with VBM Value with financial restructuring Value with internal improvements Value with improvements Financial engineering: leverage, dual class stock, carve outs, tracking stock, employee ownership, debt restructuring Divestiture activity, spin offs and disposals

  5. Dimensions of restructurings • Asset restructuring • Acquisitions • Divestitures • Spin offs • Corporate downsizing • Outsourcing

  6. Dimensions of restructuring, II • Restructuring ownership structure, leverage • Exchange offers • Share repurchases • LBO’s, LCO’s • Restructuring equity claims (next slide)

  7. Restructuring equity claims • Inside vs. outside equity ownership • MBO’s, LCO’s • ESOP’s, Employee buyouts • Active investors, institutional blockholders • Restructuring equity claims • IPO • Spin off, carve out IPO, letter stock

  8. Dimensions of restructuring, III • Ownership vs. control • Limited partnerships • Leasing • Joint ventures • Securitization • Project finance • Incentive restructuring • Value based management programs (EVA, etc.)

  9. Dimensions of restructuring, IV • Corporate control • Antitakeover amendments • Dual-class recapitalizations • Greenmail/Standstill agreements • Poison pills/Charter amendments • Defensive asset/ownership restructurings

  10. Distress related restructuring • Troubled debt restructuring • Workouts • Pre-packaged Chapter 11 • Chapter 11 reorganizations • Liquidations

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