In European businesses, the employee management things work differently. As a part of their restructuring strategy, a company management can’t lay-off their employees very easily. The restructuring procedure in Europe is quiet similar to US in many aspects such as contract renegotiation, employee appraisals, departmental transfers, cash surplus and product pricing strategies. However, European businesses follow some typical restructuring strategies, once they get complete hold on their businesses-
Mergers & Acquisitions: Merger and Acquisition is a term often used in corporate world, which refers to multiple business organizations joining hands to formulate a single enterprise. Usually, a merger is the kind of restructuring strategy in which two organizations of equal strength and industry come together to achieve some favorable objective. During the process, the stocks of two companies will get merge into a single trading company. Sometimes as a result of hostile bid the smaller organization ceases to exist while the larger company management takes almost all important company decisions.
Leverage Buy-Out (LBOs): In very simple terms, LBO involves an acquisition of business entity using low capital investment but with high loan obligation. As the company can achieve major control on the equity of other business, it is often referred as ‘Highly Leveraged Transaction (HLT). Usually, every leverage buyout is special and different in capital structure and capital leverage is the only thing which is common in acquisition of the targeted company through LBO. Businesses can also avail tax deductions as cost of debt is tax exempted.
Takeovers: Takeover is considered as an acquisition of smaller company through a giant one. Although it can produce same effects such as merger, the takeover may not takes place through mutual decisions always. Most of the times, takeovers are carried out through hostile intention, in order to eliminate competition in the market. Takeovers help businesses to enhance brand portfolio and increase in efficiency as a result of corporate synergies.
Restructuring may result in higher exposure, which helps businesses to earn higher profits, if everything goes according to the plan. As restructuring strategies have their own advantages and limitations,