Professional Documents
Culture Documents
restructuring Definition
Bringing about a drastic or fundamental internal change that alters the relationships between different components or elements of an organization or system.
2. Downsizing
One common reason for restructuring a company is to downsize the workforce. The changing nature of economy may force the business to adopt new strategies or alter their product mix, making staff redundant. Similarly, cutthroat competition and pressure on margins from competitors who adopt a low price strategy may force the company to adopt lean techniques, just in time inventory, and other measures to cut input costs and achieve process efficiency. In such situations, the organization will need to redo job descriptions, rework its team, group, and communication structures and reporting relationships to ensure that the remaining workforce does the job well. Very often, downsizing-induced restructuring leads to a flatter organizational structure, and broader job descriptions and duties.
Traditional organizational systems and controls cater to standard 9 AM to 5 PM office or factory based work. Newer methods of work, especially outsourcing, telecommuting, and flex time require new systems, policies, and structures in place, besides a change in culture, and such requirements may trigger organizational restructuring. The presence of telecommuting employees, temporary employees, and outsourcing work may require a drastic overhaul of performance management parameters, compensation and benefits administration, and other vital systems. The newer work methods may, for instance, require placing emphasis on the results rather than the methods, flexible reporting relationships, and a strong communication policy.
5. Quality Management
Competitive pressures force most companies to have a serious look at the quality of their products and services, and adopt quality interventions such as Six Sigma and Total Quality Management. Implementing new quality standards may require changes in the organization. Most of the new quality applications strive to imbibe quality in the actual work process rather than maintain a separate quality control department to accept or reject output based on quality specifications. In many cases, an organizational level audit precedes quality interventions, and such audits highlight inefficiencies in the organizational structure that may impede quality in the first place. For instance, reducing waste may require eliminating certain processes, and thereby reallocation of personnel undertaking such activities.
6. Technology
Innovations in technology, work processes, materials and other factors that influence the business, may require restructuring to keep up with the times. For instance, enterprise resource planning that links all systems and procedures of an organizational by leveraging the power of information technology may initially require a complete overhaul of the systems and procedures first.
Such technology-centric change may be part of a business process engineering exercise that involves redesigning the business processes to maximize potential and value added, while minimizing everything else. Failure to do so may result in the company systems and procedures turning obsolete and discordant with the times.
Joint ventures may also require formation of matrix teams, special task forces, or a new subsidiary.
9. Buy Outs
At times, the restructuring exercise may be the result of the whims and fancies of the owners. For instance, the company may have a new owner who wants to stamp his or her personal authority and style onto the business. Restructuring allows the new owner to:
Reshuffle key personnel and provide power to trusted lieutenants. Start with a clean state and thereby exert greater control. Preempt any inefficiencies that caused the previous owner to sell-out, and more.
With or without ownership change acting as a trigger, company owners may appoint a management consultant to review the company and suggest macro-level changes, as a routine exercise.
security measures that government networks adopt, to gain immunity from liability lawsuits in the eventuality of cyber attacks. Any organizational restructuring is basically a change initiative. Success depends on managing resistance to change by convincing the remaining workforce of the need for change and the possible benefits, an effective communication system to lend clarity to the change process, and effective leadership.
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spinoff Definition
Corporate divestiture accomplished through (1) separation of a division or subsidiary from its parent firm to create a new corporate entity by issuing new shares. These shares are distributed to the current stockholders (shareholders) in proportion to their current shareholdings, and may also be sold to the public, or (2) a leveraged buyout by the management of the division or subsidiary.
Reasons for a Spinoff * The company has adopted a strategy to focus on its core activities. Non-core related activities are spun off * The company thinks that the spun of activities can be better developed on their own, rather than as part of a bigger concern (usually the new company is a new technology or a new market) * The company thinks that it can make more money by spinning the activities off. For example it could be that the spun off company yet needs to prove it can be profitable. * Sometimes the activities don't fit in the overall branding strategy of the parent company. * The spin off activities could be more profitable than the overall parent company * Newly independent entities are no longer constrained by the overall culture of the parent company that might not fit * The spun-off company can try to seize opportunities it would normally not be able to explore * The management of the new company is often formed out of employees from the old company. For these employees, a spin off represents a good chance to make career progress. * In a takeover, sometimes the acquirer does not want or can not for regulatory reasons, buy one of the target company's businesses. A spinoff of that business to the target company's shareholders prior to the merger can provide a solution. * Tax advantages (see more below) Process of a Spinoff
1 Parent company to adopt a strategy to focus on its core business and to spin off certain parts of the business (often based on advise from management consultants, accountants, its own shareholders and industry experts) 2 Parent company to decide which assets and which debt obligations should be transferred to the newly created company 3 Parent company to appoint a Paying Agent 4 Paying agent to publish a prospectus with the exact details of the event 5 Paying agent to announce the event to shareholders via the usual communication channels 6 Custodians and broker dealers to receive the new shares from the Paying Agent and to pass them on the the beneficial owners that are entitled to receive the new shares 7 Shareholders and parent company to deal with tax consequences and amend their investment portfolios and their share value 8 Shareholders to decide their trading strategies for both companies
Spinoff ex
Viacom
The media giant plans to split into two, one offshoot focusing on broadcast TV and the other on cable networks. The spin-off is expected to be completed in the first quarter of 2006. The new Viacom will be comprised of MTV Networks, BET, Paramount Pictures, Paramount Home Entertainment, and Famous Music. The other company, CBS Corp., will consist of the CBS and UPN broadcast networks, Viacom Television Stations Group, Infinity Broadcasting, Viacom Outdoor, the CBS, Paramount, and King World television production and syndication operations, as well as Showtime, Simon & Schuster, and Paramount Parks. "The new Viacom and CBS will have highly complementary business portfolios, leadership positions in their industries, and superior management teams that have direct incentives to create greater shareholder value," says Sumner Redstone, chairman and CEO of Viacom. "In addition, each company will have distinct capital structures designed to generate higher returns." McDonald's The fast food giant filed a preliminary statement with the SEC on Oct. 25 to do a partial IPO of its casual restaurant chain Chipotle, in which McDonald's would retain a majority stake of Chipotle, distributing the rest to shareholders. "From McDonald's perspective, I think it's a pretty good idea to
spin Chipotle off in order to focus on the core brand," says Dennis Milton, who follows restaurant stocks for Standard & Poor's Equity Research. Alloy The media, marketing services, and retail company targeting teenagers is spinning off its wholly owned subsidiary, dELiA*s. The spin-off will consist of Alloy's direct marketing and retail operations, which include dELiA*s, Alloy, and CCS brands. Alloy will keep its media and marketing units. Each Alloy shareholder will receive one share of dELiA*s common stock for every two of Alloy's held on a to-be-determined record date. The exercise price in the subscription-rights offering has not been established, but will be based on a $175 million valuation for dELiA*s.
Definition of 'Split-Up'
A corporate action in which a single company splits into two or more separately run companies. Shares of the original company are exchanged for shares in the new companies, with the exact distribution of shares depending on each situation. This is an effective way to break up a company into several independent companies. After a split-up, the original company ceases to exist.
Ex. The Hero Honda Break-Up
split off
Definition
A point in the restructuring of a company where the parent companywill offer investors shares of a subsidiary in return for shares of the parent company.
Split-Offs
In a split-off, the parent company offers its shareholders the opportunity to exchange their ParentCo shares for new shares of a subsidiary (SplitCo). This tender offer often includes a premium to encourage existing ParentCo shareholders to accept the offer. For example, ParentCo might offer its shareholders $11.00 worth of SplitCo stock in exchange for $10.00 of ParentCo stock (a 10% premium).