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Economy

Corporate Restructuring

Corporate Restructuring
Merger and Acquisition. Corporate restructuring is of the best available survival option which includes mergers and acquisitions.
According to Pandey (2011) corporate restructuring is of the best available survival option which includes mergers and acquisitions, amalgamation, take over, spin-offs, cover aged bug-outs, buy-back of shares, capital reorganization, sales of business units and assets etc. It is the most popular of all the corporate restructuring or business combination which had contributed immensely to the external growth of a many leading firms globally. Also, corporate restructuring equally means changes in ownership, asset mix, business mix etc with an objective of increasing firms and the shareholders’ value. This would eventually lead to an increase in the return on investment. Corporate restructuring can also be termed business combination and it includes merger and acquisition, amalgamation, takeover, leveraged buyouts, capital reorganization, sale of business units and assets.
Merger and Acquisition
In the present day business world, merger and acquisition has always been one of the very important strategic tool used to achieve specific business objectives (Sudarsanam, 2003). Merger and acquisition happens when two legal entities assets and liabilities are combined to become one legal entity (Frantlikh, 2003).
If merger and acquisition are to be defined separately, acquisition generally means a larger company absorbing a smaller company, with the smaller firm either becoming a subsidiary of the larger firm, hence losing its identity, and larger company will take control of smaller company’s asset and liabilities. Merger on the other hand, generally used to reflect consolidation of two companies on an equal status basis. Merger and acquisition are often used interchangeably and this is because they both basically lead to the same outcome whereby two entities become one ( Cara Publikasi Jurnal Internasional , 2019)
Corporate Restructuring - Image 1
In reality, pure merger or mergers in equal basis do not happen very often but more common in acquisition. The trick and consideration in acquisition usually carries a negative perception and could be discouraging and demoralizing to the morale of the company being acquired as members of staffs are likely to lose their jobs or experience a reduction of there income, hence damaging future synergies, expected post-merger and acquisition (Kotter & Schlesinger 2005). So therefore, despite all kind of theories and definitions to differentiate merger from acquisition, the acquirer firms usually prefers to call it merger and acquisition, which brought about the usages of merger and acquisition interchangeably today. Unless the deal is being generally recognized as a hostile takeover by the acquirer, where then it would be seen as a pure acquisition and in any other cases they both would be seen as same ( Cara Publikasi Jurnal , 2019).
Merger
Merger has being defined by the companies and Allied matters Act; CAMA (1990 as amended) as any amalgamation of two undertakings or interest of two or more companies and so or the undertakings of one or more companies and so or more corporate bodies. A merger could therefore, be simply defined as coming together of two or more separate entities to form a single entity. In other words, it is the complete amalgamation of the assets and liabilities as well as shareholders interest and businesses of the merging entities. Thus, all in all, a new company must emerge that which would swallow up all other merging ones. Other words that are synonymous to merger are absorption, consolidation, amalgamation, combination and synergy. Osanwonyi (2003) sees Merger as the pooling together of the resources of two or more companies, resulting in one surviving company while the other is absorbed and ceases to exist as a legal entity or remains a subsidiary if it survives. Also, Awasi Mohammed and Vijay Baskar (2009) explained merger as the combination of two or more companies in creation of a new entity or formation of a holding company.
Acquisition
Acquisition and Take-over are often used interchangeably. CAMA (1990) defines a Take over as the acquisition by one company of sufficient shares in another company to give the acquiring company control over that of the other company. Acquisition means an act of acquiring effective control over asset or management of a company by another company without any combination of businesses or companies. It is also defined as the process of taking a controlling interest in a business. An acquisition may also arise through the purchase of the assets (rather than shares) of the target entity. Usually, an acquisition will occur where an individual offered company acquires all the assets of another company and becomes the new owner. Pandey, (2011) defines Acquisition also to means acquiring effective control over assets or management of a company by another firm devoid of combination of business or businesses However, when another firm acquires a substantial share or assets or voting right of a target company it will definitely affect the control of the target company. Again, European Central Bank (2000) defines acquisition as the purchase of share or assets on another company in order to achieve a managerial influence and not necessarily by mutual agreement.
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