Entries in the Category "mgmt251"
RESTRUCTURING & DOWNSIZING
Part 9 of 9
White Collar vs. Blue Collar
For those studying to be manager, the heart wrenching effects of corporate restructuring are not felt. Unless one has day-to-day contact with the companies labor force, the names are more that likely to be viewed upon as assets. Unlike machines that can be disposed off with out a second thought, letting go of a worker has much greater effects on the community. A dramatic change as the automotive industry has under taken will not only hurt communities with the loss of income, but possibly the increase of crimes as a matter of survival.
To be the best managers we can be, we have to keep reminding our selves that thousands of people rely on us to make good decisions, and trust in us to keep the company afloat. Granted there are times when things turned for the worse quiet unexpectedly, but unless we are managing a company without some kind of safety net, our poor decisions will cost thousands of jobs. And that is a ton to carry by your conscious.
RESTRUCTURING & DOWNSIZING
Part 8 of 9
Delphi
Whenever large corporations experience downturns, the ripple effect is felt by their suppliers. The case is the same with the auto manufacturers and their suppliers. Delphi Corp. a major parts supplier to GM has filed for Chapter 11 Bankruptcy. It is asking the courts to reject unprofitable contracts with GM. Delphi Corp will also sell or close 21 of its 29 facilities. Additionally it will buy out 17,000 unionized workers to continue with its drastic downsizing. As drastic as it might be, the company is looking towards the future. The loss of a company that does not recover is much greater than jobs, that hopefully will be regained in the future.
To read more about Delphi Corp. read...
http://detnews.com/apps/pbcs.dll/article?AID=/20060401/AUTO01/604010302/-1/ARCHIVE
RESTRUCTURING & DOWNSIZING
Part 7 of 9
GM & Ford
Last year the automotive industry suffered losses the billions of dollars. In order to survive, and avoid bankruptcy, Detroits Top 3 (GM, Ford, & Chrysler) adopted extensive downsizing and restructuring plans.
Through out the country and its many plants around the world, GM and Ford alike cut tens of thousands jobs. Additionlly closing manufacturing plants, reducing production capacities. All essential to cover loses, and ever increasing health care cost to retired workers.
It now seems these programs are slightly paying off. GM's rating has been raised and its stocks have rose 8%. It is a good sign however, GM still has much work to do before it rebuilds is powerhouse. With Toyota increasing market share, GM is more than likely going to be dethrowned as the number one car manufacturer.
For more on GM's recent improvements read:
http://www.chicagotribune.com/business/chi-0604270218apr27,1,5507020.story?coll=chi-business-hed
RESTRUCTURING & DOWNSIZING
Part 6 of 9
Operational Restructuring
Operational restructuring, is the process of increasing the economic viability of the underlying business model. Examples include mergers, the sale of divisions or abandonment of product lines, or cost-cutting measures such as closing down unprofitable facilities.
In most turnarounds and bankruptcy situations, both financial and operational restructuring must occur simultaneously to save the business.
In recent months the Automotive Top 3 (GM, Ford, & Chrysler) have been forced to restrcuture due to poor market performance and heavy fixed retirement costs. The changes made will also have great affect on other industries and markets that rely car manufacturers.
Some recent new:
Ford
http://www.autoindustry.co.uk/news/06-04-06_5
GM
http://www.autoindustry.co.uk/news/21-04-06
Goodyear
http://www.autoindustry.co.uk/news/07-04-06_9
Prof. Ian H. Giddy, New York University
RESTRUCTURING & DOWNSIZING
Part 5 of 9
Financial Restructuring
Financial Restructuring is the reorganiztion in the capital structure of the firm. An example of financial restructuring would be to add debt to lower the corporation's overall cost of capital. More often firms restructure debt rescheduling or equity-for-debt swaps based on the strength of the firm.A recent example of financial restructuring would be the Eurotunnel requesting more time to repay its debt. In oder to do this the original agreement has to be refinanced.
To read more visit about the Eurotunnel visit:
Financial restructuring involves restructuring the assets and liabilities of corporations, including debt-to-equity structures, in line with cash-flow needs to promote efficiency, support growth, and maximize the value to shareholders, creditors and other stakeholders.Financial restructuring at times requires refinancing at every level of capital structure
Work Cited
Prof. Ian H. Giddy, New York University
RESTRUCTURING & DOWNSIZING
Part 4 of 9
Portfolio Restructuring
According to Forbes.com, Portfolio Restructuring is the reconstruction of a portfolio asset mix by selling off undesired assets (for example: equities, debt, or cash) or securities. And buying desired assets and/or securities to maintain a profitable asset portfolio.
Good examples are corporations with multiple brands, for example Procter & Gamble and Colgate-Palmolive. Although these companies started of as single product companies, over the years they have expanded and acquired other businesses. To provide more products with the same quality and performance consumers have been used to originally. Proctor & Gamble earlier this year has acquired Gillette and will continue to use the name due to its branding power. It is an asset the increases the value of P&G product portfolio.
RESTRUCTURING & DOWNSIZING
PART 3 of 9
DOWNSIZING
In an ideal world businesses would continue to grow and create shareholder value. However, in the limited resource world we live in, companies rise and fall. Some giants fall due to poor management decisions, as with recent downsizing within the motor industry, or due to uncontrollable social and environmental disasters.
Companies downsize to cut cost, improve efficiency and to maintain a profit level acceptable to their shareholders. Downsizing is the deliberate decision to reduce the work force that is needed to run the current size of the business. Layoffs are a part of a larger plan, where organizations analyze their core business and develop their business to its fullest extent.
There are two types of downsizing.
Proactive is a restructuring strategy of an organization to obtain efficiency and market share.
Reactive, where the downsizing occurs because of deep financial trouble within the organization.
Downsizing occurs because of an intentional decision to reduce personnel. Commonly disproportionately in the management ranks, reestablishing efficiency and/or effectiveness objectives. The main theme of downsizing is to lower operating expenses by employee elimination to show a greater profit for the company.
The organization’s prerequisite to downsizing is attributed to cost efficiency, greater control and to develop a company that is able to react to a changing market within a short period of time.
RESTRUCTURING & DOWNSIZING
PART 2 of 9
RESTRUCTURING
The lesser of two evils is, corporate restructuring are the changes in organizational structure. There are several causes for such changes, industry consolidation, deregulation of markets, globalization of brands, convergent technologies across industries. Restructuring is implemented to improve performance and sustain profits and the many characteristics of the business environment change.
There are three types of restructuring:
Portfolio restructuring: making additions to or disposals from companies' businesses (through acquisitions or spin-offs)
Financial restructuring: changing the capital structure (through leveraged buy-outs)
Organizational restructuring: changing from a functional to a business-unit design
The most important thing to remember about business world is that each industry is made up of people. Without people, there is no business. When profits are low, management often begins to think about downsizing to recover. If this is done from profit motivation only, the results can literally put you out of business. A wise course, before taking any action, is to review your initial business plan. Simply downsizing does not take into consideration the profit venues that the company has. To better understand a particular business, management has to understand the purpose of each employee. The purpose of restructuring is to weed out jobs that do not add value to products a business offers. By streamlining work efficiency it allows a business to concentrate on true profit items. Thereby increasing profits and eventually regaining a competitive edge in the market.
CORPORATE RESTRUCTURING & DOWNSIZING
PART 1 of 9
Introduction
This second series of nine blogs will be dedicated to Corporate Restructuring and Downsizing. Almost, if not, the direct antipode topic of Mergers and Acquisitions. Restructuring and Downsizing are used methods to improve the efficiencies of companies that not only want to increase shareholder value but more importantly keep them alive before possibly but not always filling for chapter 11 A topic which affects employees, their families and communities all over the world due to the loss of employment. Additionally, that fuels the animosity between laborers and managers, whose decisions possibly brought a company to its knees.
MERGERS & ACQUISITIONS
PART 9 of 9
MERGERS & ACQUISITIONS
PART 8 of 9
MERGERS & ACQUISITIONS
PART 7 of 9
MERGERS & ACQUISITIONS
Part 6 of 9
Mergers and Acquisitions: Why They Can Fail
As great as they sound most mergers do no succeed. At first it might seem like the perfect solution, however it is rather complicated to "merge" two or large companies(let alone corpoarations)into one.
Many mergers simply fail due to flawed intentions. A glory-seeking CEO might think a merger of firms might be his ticket to a large bonus. That is of course if it works out.
Another reason is globalization. Firms might fear the need to expand or be swallowed by others. By merging with other firms the hope the will be able to compete in several different markets and sustain significatn market share and profits.
Additionally, two firms might be very different. Structurally and culturally. Infusing the two into one system (or management strategy ) is simply mission impossible.
MERGERS & ACQUISITIONS
Part 5 of 9
Mergers and Acquisitions: Fighting a Takover
In many cases the target company does not want to be taken over. There are many strategies that management can use during M&A activity, and almost all of these strategies are aimed at affecting the value of the target's stock in some way. These are all types of what is referred to as "shark repellent".
Golden Parachute
This measure discourages an unwanted takeover by offering lucrative benefits to the current top executives, who may lose their job if their company is taken over by another firm.. Golden parachutes can be worth millions of dollars and can cost the acquiring firm a lot of money and therefore act as a strong deterrent to proceeding with their takeover bid.
Greenmail
Occurs when a large block of stock is held by an unfriendly company, who then forces the target company to repurchase the stock at a substantial premium to destroy any takeover attempt. This is also known as a "bon voyage bonus" or a "goodbye kiss".
Macaroni Defense
This is a tactic by which the target company issues a large number of bonds that come with the guarantee that they will be redeemed at a higher price if the company is taken over. This is a highly useful tactic, but the target company must be careful it doesn't issue so much debt that it cannot make the interest payments.
People Pill
Here, management threatens that in the event of a takeover, the management team will resign at the same time en masse. This is especially useful if they are a good management team. However in a hostile take over, management is usually replaced, this tactic greatly dependent on the situation.
Poison Pill
With this strategy, the target company aims at making its own stock less attractive to the acquirer. There are two types of poison pills.
Flip-in poison pill
Allows existing shareholders to buy more shares at a discount. This type of poison pill is usually written into the company’s shareholder-rights plan. The goal of the flip-in poison pill is to dilute the shares held by the bidder and make the takeover bid more difficult and expensive.
Flip-over poison pill
Allows stockholders to buy the acquirer's shares at a discounted price in the event of a merger. If investors fail to take part in the poison pill by purchasing stock at the discounted price, the outstanding shares will not be diluted enough to ward off a takeover.
Suicide pill
The takeover-target company may take action that may lead to its ultimate destruction.
Sandbag
With this tactic the target company stalls with the hope that another, more favorable company (like “a white knight”) will make a takeover attempt. If management sandbags too long, however, they may be getting distracted from their responsibilities of running the company.
White Knight
This is a company (the good guy) that makes a friendly takeover offer to a target company that is facing a hostile takeover from another party (a black knight). The white knight offers the target firm a way out with a friendly takeover
MERGERS & ACQUISITIONS
Part 4 of 9
Mergers and Acquisitions: Takeovers
Through mergers and acquisitions, a company attempts develop a competitive advantage and ultimately increase shareholder value.
There are several ways that two or more companies can combine their efforts. They can partner on a project, mutually agree to join forces and merge, or one company can outright acquire another company, taking over all its operations, including its debt, and sometimes replacing management.
Hostile Takeover
This is an unfriendly takeover attempt by a company “raider firm” that is strongly resisted by the management and the board of directors of the target firm. Usually bad news, affecting employee morale at the targeted firm, which can quickly turn to animosity against the acquiring firm.
Saturday Night Special
This is a sudden attempt by one company to take over another by making a public offer. The name comes from the fact that these maneuvers used to be done over the weekends. This too has been restricted by the Williams Act in the U.S., whereby acquisitions of 5% or more of equity must be disclosed to the Securities Exchange Commission.
Continue reading "MERGERS & ACQUISITIONS"
MERGERS & ACQUISITIONS
Part 3 of 9
Mergers and Acquisitions: Acquisition Defined
Acquisition: when a company takes over another and establishes it’s self as new owner.Legally the bought out company ceases to exist
All acquisitions involve one firm purchasing another - there is no exchange of stock or consolidation into new company. Acquisitions are often congenial, and all parties feel satisfied with the deal. Acquisitions can also be hostile.
In an acquisition, a company can buy another company with cash, stock or a combination of the two. Another possibility, common in smaller deals, is for one company to acquire all the assets of another company
Types of acquisition
Reverse merger (a back door listing)
A deal that enables a private company to get publicly-listed in a relatively short time period.
MERGERS & ACQUISITIONS
Part 2 of 9
Mergers and Acquisitions: Mergers Defined
The reasoning of buying a company (or managemesnt goal in general)is to create shareholder value greater then the sum of the two companies. Mergers and Acquisitions are alluring when times are tough economically.(i.e. post 9/11 economic downturn) By taking advantage of the struggling firms and gain market share by overtaking the competition. Or joining with partners to create a single large corp.
Although the actual words are synonyms mergers and acquisitions have slightly mean different things.
Merger: when two firms agree to operate as a single new company rather than to remain separate entities owned and operated. Both companies stocks are surrendered and new company stock is issued in its place. Merger of Equals happens when joining firms are about equal in size. Does not happen very often. since many firms are not of equal size and most mergers are biased.
Merges vary based on relationship between the two companies that are merging:
Horizontal merger
Two companies that are in direct competition and share the same product lines and markets.
Vertical merger
A customer and company or a supplier and company. Think of a cone supplier merging with an ice cream maker.
Market-extension merger - Two companies that sell the same products in different markets.
Product-extension merger
Two companies selling different but related products in the same market.
Conglomeration
Two companies that have no common business areas.
More Mergers: distinguished by how the merger is financed.
Purchase Mergers
When one company purchases another. The purchase is made with cash or through the issue of some kind of debt instrument; the sale is taxable.
Consolidation Mergers
With this merger, a brand new company is formed and both companies are bought and combined under the new entity. The tax terms are the same as those of a purchase merger.
MERGERS & ACQUISITIONS
PART 1 of 9
Mergers and Acquisitions: Introduction
Mergers, acquisitions and restructuring are a big part of the corporate world. Every day, Mergers and acquisition transactions occur, that bring smaller firms together to form larger ones. According to the Federal Trade Commission (FTC) the United State is in mist of a “Merger Wave”. From 1991 to 1997 mergers and acquisitions grew a staggering 142%.
Mergers and Acquisitions often make the news. Not only due to the size of some the deals but the also the impact they can have on a market, positive and negative. Check the Wall Street journal any day, and you more than likely find an article about a merger or an acquisition of some sort. Deals can be worth hundreds of millions, or even billions, of dollars. They dictate the fortunes of the companies involved for years to come. For a CEO, this can be the highlight of a career. And why do we hear about so many of these transactions? Simply, because they happen all the time.