Summary

This topic described the various topic of corporate restructuring and the reasons companies undertake corporate restructuring exercises. There may be many ways to go about structuring corporate exercises and various reasons for such exercises. However, ultimately the success of any corporate restructuring exercise should be judged on whether shareholders’ value has been increased as a result of the corporate restructuring.

Self-Assessment / Activity
1. Which fiction might affect the choice between cash or share
consideration for acquisitions?
A. Shareholding structure of the acquirer
B. Cash flow of acquiree company
C. Profit of the acquiree company
D. Composition of the Board of Directors

2. Which of the following statements is TRUE in relation to a spin-off?
A. Spin-off companies normally have the same management team as the parent company.
B. Spin-off provides the parent company with positive cash flows
C. Spin-offs is the same as equity carve-out
D. Spin-off companies have the same shareholders as their parent companies.

3. Which of the following statements DOES NOT describe an MBO?
A. An MBO is a form of LBO
B. The vendor of an MBO is the parent company needs cash
C. One of the reasons for an MBO is the parent company needs cash
D. MBO and LBO undergo the same process.

4. Additional factors to be considered by companies undertaking cross border M&As are stated below EXCEPT:
A. Foreign currency exposes
B. Political risk
C. Purchase consideration
D. Transfer pricing

5. Which one of the following statements is TRUE in a relation to section 176 scheme of arrangement?
A. A capital reduction will help to reduce or eliminate the accumulated losses of the company.
B. Creditors normally will obtain a restraining order under Section 176 of the Companies Act 1965 to prevent the management from undertaking a restructuring exercise which may jeopardise their interest.
C. In the scheme of arrangement, all the creditors of the company will be assured of receiving RM1 settlement for every RM1 owned by the company.
D. In a scheme of arrangement, the white knight refers to the party that buys the company’s assets.

Additional Questions:
The ultimate aim of M&A is to increase shareholders value, the decision to undertake an M&A should only be made after considering the factors impacting shareholders value, which include:
I. price factor
II. shareholder factor
III. purchase consideration
IV. the potential integration, management and business issues arising from the transaction

A. I only
B. I and II only
C. I, II and III only
D. All of the above