Understanding the Different Types of Corporate Reshuffling

Corporate revamps and restructuring business models now longer a one-off phenomenon. They are now a commonplace in the business world. Such restructuring decisions are taken by small as well as big entities across the world. Many businesses now make a part of their strategic goals to expand or narrow down their business portfolio depending on their present situation.

Understanding company expansions and contractions

Business entities that intend to diversify their portfolio usually rely on takeovers, joint ventures, asset buyouts, mergers and acquisitions to meet their business goals. Though these processes may sound different, they are simply variants of corporate reshuffling that merges together profitable reserves of two different units on one common platform. They are often taken as harmonic in approach since they are expected to bring in augmented profits that come from economies of scale, asset multiplication, making the best use of tax benefits and creating a highly systematic management system. 

On the other hand, contracting essentially means a company divestiture, while it could also mean a split up, spinoff or any other type of restructuring that narrows down the business portfolio. In such a scenario, the critical task is getting rid of loss-inducing units and verticals so as to limit heavy losses. These steps are often taken when a business is aiming for higher productivity and efficiency. Also, the reason behind such a decision could be focusing on sectors that come with high-profit spawning capacity.

When an organization decides to sell off some of its assets that are not fulfilling their financial goals, they will require the guidance of sell side advisory firms at some point or the other. Though a business may think divestiture is an easy job at hand, it is actually quite complex. Apart from comprising selling off a part of the organization to another, there many things involved in the process. It has to be a calculated move taken keeping in mind the best interests of the seller. A spinoff is a situation of when an entity is transformed into a different unit that has its separate legal presence and a shared seal. On the other hand, a split up happens when one organization is divided into either two or more than two separate entities.

Advisory firms not just assist businesses with their expansion or contraction plans, but they also come in picture when an entity is going from private to a public limited one and vice versa.

Here’s a Quick Lowdown on Mergers and Acquisitions

In the world of business, acquisitions and mergers are terms used quite frequently. However, not everyone is aware of what these terms actually mean and imply. Quite often, both the terms are used side by side. To put it in simple terms, they mean when two business holdings decide to come together and shape up as one single entity.

Understanding the key difference between a merger and an acquisition

Majority of times, a merger happens when two entities of nearly same clout and size engage in a tie-up and start functioning as one unit. Stocks of both the entities are also merged together. On the other hand, a company acquisition happens when a bigger business entity decides to buy out a company of a smaller scale. This usually assumes the model of a complete buyout or a takeover. An acquisition might be a mutually decided upon takeover or could be the outcome of a bitter feud between the two companies. In the latter scenario, the smaller entity has nothing much to say and usually ends up heeding to the demands of the larger firm. In such a case, the smaller firm stops operating independently and the larger company goes on with trading the small company’s stocks.

Cross border mergers and acquisitions are commonplace in the whole sphere of business activities. They are not a new phenomenon and have been happening since several decades. A classic example of a cross border takeover is when several low-scale British firms stopped operating once they were bought over by Santander, a renowned banking giant from Spain. This was however a smooth acquisition since regardless of the size and clout, both the sides decided to showcase themselves not as an acquisition, but more of a merger.

A classic instance of a merger could be the coming together of SmithKline Beecham and Glaxo Wellcome that happened in the year 1999. Post-merger, both entities became one and came to be known as GlaxoSmithKline. On the contrary, some much-publicised acquisitions that shook the business world include that of Daimler-Benz taking over Chrysler in 1999. On many occasions, acquisitions and mergers are difficult to categorize and it is quite challenging to scrutinize the various elements that go into determining whether a particular merger or an acquisition has proved to be failure or a success. 

For a successful merger or even an acquisition, it is very important that both the entities recognize each other’s strengths and weaknesses if they wish to do business in a harmonic way.

What is the role of corporate finance firms?

Corporate finance firms mainly deal with monetary decisions made by business enterprises. They also deal with the tools and analysis that go into making that decision. In a company, the corporate finance department handles budgeting. They decide how much money needs to be allocated to each part of a business. They also determine ways to finance projects for the business.
When it comes to corporate finance firms, the definition varies across the world. For instance, in the US, it is used in a broader sense compared to the UK. It is used for describing decisions, activities or techniques that deal with several aspects of a business organization’s finances and capital. In the UK, this type of firm is involved in transactions in which capital is raised for creating, developing, growing or acquiring a business.
Corporate finance advisors deal with monetary aspects of a business so that it functions efficiently, increases profits, minimizes cost of production and grows. Here is the classification of the importance of corporate finance firms:
•    They play a vital role in decision making that needs to be done on the basis of available capital and resources. When investing in a new venture, the company needs to be consider factors like, availability of finances and the duration for completion of the project. This is where the role of corporate finance advisors comes into picture.
•    Such firms or advisors help the company in research and development. It is important for a business to research the market and develop new products for appealing the customers. All these activities require financial support and guidance that the advisors provide.
Be it liquidity strategy or corporate finance, it is important to seek professional help. Only a team of professionals can deliver the desired results for your business. 

Understanding Business Buying Behavior

Business buying behavior involves an industrial buyer or a business to business buyer. It involves business organizations that purchase goods and services for production of other goods and services. Business buying behavior also includes reselling, renting or supplying to other businesses.
In the business market, there are several organizations that are involved in the manufacturing and distribution of products and services that are sold or provided to other organizations. Since the business market is huge, it draws interest from millions of companies across the globe that are marketing to business customers exclusively. For these marketers, it becomes necessary to understand how purchase decisions are made by businesses. This helps them in improving their marketing efforts.
Categories of Business Buyers
There are mainly four categories of business buyers, including producers who purchase goods and services for producing other goods, resellers who purchase finished goods and resell them to make profit, institutions like universities, colleges and hospitals and the federal, local and state bodies that purchase goods for benefitting the public at large.
Factors that Impact Business Buying Behavior
There are several economical, company, interpersonal and individual factors that can influence business buying behavior. For instance, economical factors like technology changes, regulatory changes, fiscal policy, competition, monetary policy and so on influence buying behavior of businesses. Business buyers keep tracking and analyzing economic factors. Even company level factors play an important role. For instance, sales experts have to focus on understanding how the purchase department is organized and who are the main players in the department.
Be it business buying or venture capital advisory, it is important to seek professional help in understanding what needs to be done and how. In business buying, demand for products and services by businesses is affected by consumer purchases. Even a small swing in consumer demand can create huge changes for business purchasing.