Corporate restructuring is the process through which a company modifies its financial, operational and or organizational structures. Motivations for this include to make the company more competitive, survive adverse economic times, or move in an entirely new direction.
SIB assists companies to significantly modify their financial and operational aspects through the following methods:
Mergers
A merger is the process of combining two or more companies to form a new entity. A business may undertake a merger to increase profits, reduce risk, diversify their products and reduce risk. A recent and famous example of a merger in Kenya is the NIC bank and CBA bank merger in 2019 to form NCBA.
Acquisition
A company can buy a stake in another with permission from its board. The purchased company therefore ceases to exist, and all of its operations and assets are acquired by the first. This is called an acquisition. Recent examples in Kenya include the acquisition of National Bank of Kenya by KCB Group PLC in 2019 and the acquisition of Habib Bank Kenya Limited by Diamond Trust Bank Kenya Limited in 2017 to operate under the name Diamond Trust Bank Limited.
Takeover
A takeover is a form of acquisition where one company buys out the shares of another with or without seeking permission from its board of directors.
Privatization
Privatization is the process by which a government owned entity is converted to a private one in order to save money and/or increase efficiency. Examples of completed privatization transactions in Kenya include that of Telekom Kenya in 2007 through a strategic sale and Kenya Reinsurance Corporation in 2007 through an IPO (Initial public offering).
Nationalisation
Nationalisation is the opposite of privatization. Here, a privately owned company is taken over by the national government or state. An example of nationalisation transaction is the ongoing one involving Kenya Airways.
Divestiture/ divestment
This involves the partial or full disposal of a company’s assets or business through closure, sale, exchange or bankruptcy. This is the opposite of investment. A company may decide to divest due to redundancy or unprofitability of a certain section. Divestment is therefore done to cut costs and increase profits, ensure business stability, generate cash and increase the value of the resale. Locally, Centum Investments LTD is known for routinely divesting from companies.
Balance Sheet Restructuring
Balance sheet restructuring is the process of reorganizing the financial position of a company in order to make it more profitable. This may include the sale of under-performing divisions/assets and conversion of some or all debt obligations to equity.
SIB has over 20 years’ combined experience in corporate restructures. For more information, reach us on advisory@sib.co.ke