ABeam Research - Corporate Restructuring

ABeam Research - Corporate Restructuring Corporate Restructuring Shrink to Grow CEO??www.ceoknowledge.com 特此声明：仅供专业和学术交流，禁止用于商业用途！文件分享人：CEO智库中国最专业的网上管理与资本知识宝库，由顶级管理咨询和投资银行家为成长企业高管、CEO、金融界人士精选非时效性质的高端财经、资本市场、投行、管理、战略等知识性文档和书籍供下载和阅读。该智库由协纵国际企业港有限公司管理，如对管理和资本知识文档感兴趣，可以登录 www.ceoknowledge.c...

Corporate Restructuring Shrink to Grow CEO??www.ceoknowledge.com 特此声明：仅供专业和学术交流，禁止用于商业用途！文件分享人：CEO智库中国最专业的网上管理与资本知识宝库，由顶级管理咨询和投资银行家为成长企业高管、CEO、金融界人士精选非时效性质的高端财经、资本市场、投行、管理、战略等知识性文档和书籍供下载和阅读。该智库由协纵国际企业港有限公司管理，如对管理和资本知识文档感兴趣，可以登录 www.ceoknowledge.com 您会发现一高端的知识海洋在等待您。。 • 提供成长企业展示商业模式、产品和服务的平台和渠道 • CEO智库下辖CEO商业联盟俱乐部用创新通讯方式链接万名企业高管，互通信息和共享商机。 • 社区和论坛提供客户与资本与管理专家对接，是帮助客户获得决策辅助建议的平台 • 组群和论坛具备CRM、IR、知识管理、MIS管理功能，是客户强有力的成长助手协纵国际企业港是中国首家柔性办公和企业成长连锁基地。母公司盛富资本为亚洲投行，提供跨境商业地产资产管理解决方案，下辖私募股权投资、房地产基金、资本筹集、购并和香港上市保荐业务，近年从英美引入最新柔性办公基地（Flexible Managed Office）模式，提供灵活柔性办公场所，配合协助企业成长的增值服务。 CEO??www.ceoknowledge.com 租期：短可一月长可七年面积：小至一席大至一层成本：节约投资避免浪费地点：入驻一点多点通行服务：知识智库资本投资柔性办公空间解决方案 30-1800平米办公面积可灵活划分 即租即用，低成本获规模形象 含装修到家具，可选个性化二装和布置 宽敞前台、洽谈室、等候室、休息室、中央主机房 配有行政秘书及咖啡茶水服务 配有视频会议和电话会议系统的会议室和培训室 24小时空调，全电脑门禁安防监控系统大幅降低成本的虚拟办公和办公位方案 办公位方案 入住一点获辐射全国的地址 代客来电接听，中英文应答 一卡在手畅通全国的会议和办公服务 临时接待客户服务 初创业者获大企业办公环境成长解决方案 财务、法律、税务支持与外包 人力资源、E营销、企业战略诊断 免费专业智库支持，沙龙、论坛和商业互惠联盟，提供商业人脉拓展机会 商业模式和商业计划书辅导，引入PE投资和安排私募配售 管理、战略咨询、私募配售和高管培训 母公司拥有上市保荐人资格和旗下PE基金，可帮助解决管理和资本困惑协纵深圳柔性办公基地 ◆华侨城智慧广场基地：南山区华侨城侨香路与深云路交汇处智慧广场B座11层 ◆车公庙财富广场基地：福田区车公庙深南大道与农园路交汇处财富广场A座24层 ◆联合广场基地：福田区滨河路5022号联合广场B栋7层 ◆蛇口明华国际会议基地：南山区蛇口龟山路八号明华国际会议中心二号楼12层 ◆佳和华强大厦基地：福田区深南中路佳和华强大厦B座10层(华强北） ◆闽泰大厦基地：南山区滨海大道与文心五路交汇处闽泰大厦14层 ◆南方国际广场基地：福田区益田路3013号南方国际广场B栋18层协纵北京柔性办公基地 ◆京信大厦基地：朝阳区东三环北路甲二号京信大厦13层 ◆朝外MEN大厦基地：朝阳区朝外大街26号MEN大厦12、29层 ◆中汇广场基地：东城区东直门南大街11号中汇广场C座10、11层协纵上海柔性办公基地 ◆招商局大厦基地：陆家嘴东路161号招商局大厦12层协纵佛山柔性办公基地 ◆卓远国际商务大厦基地：禅城区季华五路2号1座卓远国际商务大厦6、7、 11、13层柔性办公基地遍布全国免费热线/Toll-free Hotline: 传真/Fax: 电邮/Email: 网站/Website: 智库/CEO Knowledge: 微博/Micro Blog: 400-654-0654 86-755-8289 9966 service@myceosuite.com www.myceosuite.com www.ceoknowledge.com http://t.sina.com.cn/ceosuite CEO智库 CEO KNOWLEDGE 协纵国际企业港有限公司 CAPITAL EXECUTIVE OFFICE LIMITED CEO??www.ceoknowledge.com CONTENTS Executive Summary 1 1. Understanding Corporate Restructuring in Japan 2 1.1 Regulatory Reforms 2 1.2 Trends in M&A Transactions in Japan 4 1.3 The Corporate Restructuring Survey 7 1.4 Summary 10 2. Creating Value through Divestitures 11 2.1 The Pattern of a Typical Corporate Restructuring Process 11 2.2 Alternative Divestiture Structures 13 2.3 Spin-Ins 14 2.4 Corporate Splits 16 2.5 Sell-Offs 19 2.6 Equity Carve-Outs 20 2.7 Spin-Offs 21 2.8 Tracking Stocks 23 2.9 Joint Ventures 24 2.10 Summary 26 3. Achieving Value-Building Growth 27 3.1 Common Obstacles to Restructuring 27 3.2 Future of Corporate Restructuring 28 3.3 Key Factors for Successful Restructuring 29 3.4 Managing Balanced Business Portfolios 30 3.5 Pruning the Portfolios through Proactive Divestitures 31 3.6 Summary 34 Glossary 35 CEO??www.ceoknowledge.com List of CASE STUDIES Case Study 1: Nissan's Dramatic Turnaround 12 Case Study 2: Matsushita's Spin-Ins to Implement Groupwide Restructuring 14 Case Study 3: Thermo Electron's "De-Conglomerating" through Spin-Ins 15 Case Study 4: NEC's Restructuring through Corporate Splits 17 Case Study 5: Sumitomo Rubber's Splitting of its Non-Tires Businesses 17 Case Study 6: Osaka Gas's Corporate Splits followed by Sell-Offs 18 Case Study 7: Japan Telecom's Use of a Holding Company as a Restructuring Vehicle 18 Case Study 8: Chugai's Reactive Spin-Off to Avoid Anti-Trust Issues 22 Case Study 9: Sony's Issuing of the First Tracking Stock 24 Case Study 10: Tomen's Formation of a Joint Venture to Foster Growth 25 Case Study 11: Takeda's Sell-Offs of Non-Core Businesses through Joint Ventures 25 Case Study 12: Hitachi's Difficulty in Finding Buyers 32 Case Study 13: GM's Preparing for a Successful Spin-Off of Delphi 33 CEO??www.ceoknowledge.com ABeam Research & Linklaters Corporate Restructuring 1 Executive Summary Since 1997, there has been a series of legislative and tax changes in Japan with the aim of facilitating corporate restructuring. In particular, the introduction of procedures such as share exchanges, share transfers and corporate splits has provided companies with greater flexibility in pursuing corporate restructuring. Although corporate restructuring is not facilitated by legislative and tax changes alone, the increased level of M&A activities over the same period is evidence that the recent reforms have, to some extent, achieved their aims. See Chapter 1. A typical corporate restructuring process comprises three phases. Faced with debt and cash flow problems, companies should execute financial restructuring immediately to stabilize their financial situation. Once the situation is stabilized, companies need to start business rebuilding to strengthen their core businesses. Finally, companies can shift their focus to long-term value-building growth. Across the three phases of the restructuring process, divestitures play an increasingly crucial role in Japan. Divestitures may take several different forms: corporate splits, sell-offs, equity carve-outs, spin-offs, tracking stocks and joint ventures. Corporate splits, minority carve-outs and joint ventures are often used as interim solutions toward an eventual exit. In Japan the most common exit alternatives are sell-offs and full or majority carve-outs. We believe spin-offs would also be popular in Japan (as they are in the U.S. and Europe) if the tax disadvantages were removed. Some of the most successful corporate restructurings have been where parent companies have prepared exit strategies at the start of the corporate restructuring process and have used interim solutions as a means to develop stronger subsidiaries before a full exit at a later date. See Chapter 2. We conducted a survey to determine the current and future trends in restructuring activities. Our findings revealed that many companies rated planning growth strategies prior to restructuring as very important, but assessed their own performance as less satisfactory. To achieve value-building growth, companies must develop and maintain balanced business portfolios. The key challenge is to nurture growth options while proactively divesting underperforming or non-core businesses. Success in proactive divestitures is likely when companies deliberately use interim solutions before an eventual exit and lay the groundwork for creating a stand-alone entity. See Chapter 3. We include in this report a number of case studies. One of the lessons that these demonstrate is: The more extensive the restructuring, the greater the growth prospects; the stronger the growth, the greater the need for restructuring. Shrink to grow and vice versa. CEO??www.ceoknowledge.com ABeam Research & Linklaters Corporate Restructuring 2 1. Understanding Corporate Restructuring in Japan This first chapter presents an overview of the recent regulatory reforms in Japan related to corporate restructuring and recent trends in M&A transactions in Japan. This chapter also sets out certain results of our survey on corporate restructuring which we conducted in March 2003. The results 1.1 Regulatory Reforms 1.1.1 Overview Over the past several years, many of the obstacles to corporate restructuring contained in the Commercial Code of Japan (the "Code") have been amended or removed, beginning in 1997 with the introduction of simplified mergers. This was followed by the introduction of equity redeployment procedures such as share exchanges (Kabushiki Koukan), share transfers (Kabushiki Iten) and corporate splits (Kaisha Bunkatsu). Consequently, examples of corporate restructuring, including divestitures, have become more commonplace in Japan. The Japanese tax rules have also been amended to provide incentives to companies to take advantage of the new restructuring measures. The corporate reorganization tax reforms have been effective since April 1, 2001 and allow for tax-free restructuring under certain circumstances. The following presents a brief list of recent changes to the Code and other legislation and the taxation rules that are relevant to corporate restructuring in Japan. • In October 1997, the Code was amended to simplify and ratio- nalize merger procedures. • In December 1997, the Anti-Monopoly Law was amended to allow pure holding companies to be established in Japan. • In October 1999, the Code was amended to introduce the share exchange and share transfer procedures. • In April 2000, the Composition Law was abolished and the Civil Rehabilitation Law was introduced to facilitate corpo- rate workouts. • In April 2001, the Code was amended to introduce the corpo- rate split procedure. • In April 2001, the corporate reorganization rules were intro- duced under the 2001 tax reform. • In October 2001, the treasury stock system was introduced. This system allows companies to buy back their shares and hold them for unspecified purposes, including later use in M&A transactions through share exchanges. • In August 2002, the consolidated taxation system was enacted. • In April 2003, the Industrial Revitalization Law was revised to facilitate corporate restructuring. Under this law, companies whose restructuring plans receive approval from the relevant authorities are eligible for tax incentives and governmental financial assistance. They may also take advantage of a less restrictive corporate law regime. As part of the revision of the Industrial Revitalization Law, there are measures designed to encourage inward investment by non- Japanese companies. For example, in a statutory merger, the revisions to the law allow shares in a third company to be issued to the shareholders of the extinguishing company (whereas normally they could only receive shares in the surviving company). What is more, the third company issuing shares can be a non-Japanese company, which makes this new law a potentially significant additional tool to facilitate inward investment and corporate restructuring in Japan. of this survey illustrate the recent trends in M&A transactions in Japan and give an insight into how Japanese companies are conducting (or intending to conduct) corporate restructurings in the future, in particular how Japanese companies are starting to make use of alternative methods to conduct such restructurings (see Chapter 3). CEO??www.ceoknowledge.com �� Figure 1.1 Share Exchanges Source:ABeam Research Figure 1.2 Share Transfers Source:ABeam Research �� α α α � �� Figure 1.3 Types of Corporate Splits Source:ABeam Research �� α � �� α � �� α � �� α β β β β � �� α �� α �� α �� α � �� αβ β �� α β � �� α � �� β � �� α �� Figure 1.3 ABeam Research & Linklaters Corporate Restructuring 3 1.1.2 Share Exchanges The share exchange procedure, which was introduced in October 1999, allows companies to make other companies both within the group and outside the group wholly-owned subsidiaries (Figure 1.1). X Co. acquires all of Y Co.'s outstanding shares in exchange for new shares issued by X Co. at a predetermined exchange ratio. As a result of the completion of the share exchange, Y Co. becomes a wholly-owned subsidiary of X Co. and shareholders of Y Co. become shareholders of X Co. 1.1.3 Share Transfers The share transfer procedure, which was introduced along with the share exchange procedure in October 1999, allows companies to create a new holding company (Figure 1.2). X Co. incorporates a new company. New Co. acquires the entire shares of X Co. in exchange for new shares issued by New Co. Subsequently, X Co. becomes a wholly-owned subsidiary of New Co. and shareholders of X Co. become shareholders of New Co. 1.1.4 Corporate Splits The corporate split procedure was introduced in April 2001. Under the Code, corporate splits are classified into two types: (i) where a business is transferred into a new company; and (ii) where a business is transferred to an existing company, in each case, in exchange for shares in the transferee company. It is also possible to transfer a business to a newly established joint venture company in exchange for shares in the JV company. For tax purposes, corporate splits are further classified according to whether the new shares as consideration are distributed to the transferor company or directly to the shareholders of the transferor company. Accordingly, there are the following types of corporate splits (Figure 1.3). CEO??www.ceoknowledge.com Figure 1.4 Number of Japanese Company Related M&A Transactions Source:Nomura Securities �� Figure 1.5 Total Value of Japanese Company Related M&As Source:Nomura Securities �� Figure 1.6 Number of In-In M&A Transactions by Type Source:Nomura Securities �� ABeam Research & Linklaters Corporate Restructuring 4 1.2 Trends in M&A Transactions in Japan 1.2.1 General Trends In the following pages, we describe the trends in M&A transactions up to the end of 2002. The total number of Japanese company related M&A transactions announced in 2002 increased to 2,244. The number of M&A transactions between Japanese companies ("In-In deals") constituted 84% of all deals in 2002. It is interesting to note the significant increase in the number of In-In deals in the five-year period from 1997–2002 (Figure 1.4). In this paper, we have only included data for the number of M&A transactions completed; complete data showing the value of these transactions is not available. Data was available for 931 out of 2,244 M&A transactions announced in 2002 (i.e., 41% of all M&A transactions). The value of these 931 cases was 3.42 trillion yen. While the value of In-In deals remained roughly flat for the period from 2000 to 2002, the value of M&A transactions of non- Japanese companies by Japanese companies ("In-Out deals") and M&A transactions of Japanese companies by non-Japanese companies ("Out-In deals") fell dramatically during the same period (Figure 1.5). This data suggests the following trends: • there are fewer high profile (i.e., big value) transactions now than two or three years ago; and • Japanese rather than foreign companies are driving an increase in M&A transactions but such Japanese companies are pre- dominantly active in Japan rather than abroad. M&A transactions can be categorized into four types: (1) mergers; (2) equity acquisitions (controlling over 50% of the voting shares in a company); (3) asset acquisitions (whether an entire business or a collection of assets); and (4) equity participations (controlling up to 50% of the voting shares in a company). Mergers constituted the majority of In-In deals in the 1990s. While the number of equity acquisitions, asset acquisitions and equity participations increased during the 2000 to 2002 period, the number of mergers remained flat during the same period and consequently accounted for only 21% of In-In deals in 2002 (Figure 1.6). Significantly, asset acquisitions rose by 70% in 2002 over 2001. This sharp rise in asset acquisitions reflected the increasing number of business divestitures and sell-offs of assets as part of corporate restructuring. CEO??www.ceoknowledge.com Figure 1.7 Number of Inter- and Intra-group M&A Transactions Source:Nomura Securities �� Figure 1.8 Number of Inter-group M&A Transactions by Type Source:Nomura Securities �� Figure 1.9 Number of Intra-group M&A Transactions by Type Source:Nomura Securities � �� ABeam Research & Linklaters Corporate Restructuring 5 M&A transactions are often categorized as either inter-group or intra-group. An inter-group M&A transaction is when companies from two different groups are involved. An intra-group M&A transaction is when all of the companies involved in the transaction belong to the same group. Inter-group and intra-group M&A transactions increased in parallel from 1995 to 1999. Thereafter, the number of inter- group M&A transactions surpassed that of intra-group M&A transactions, reflecting the increased level of restructuring in Japan generally (Figure 1.7). The mix of inter-group M&A transactions underwent significant changes during the 2000–2002 period. Equity participations tripled in number to 377 in 2002. Asset acquisitions showed a 2.5-fold increase (Figure 1.8). Although mergers are still the most popular form of transaction in intra-group M&A transactions, asset acquisitions and equity acquisitions have grown in popularity in recent years (Figure 1.9). The growth in asset acquisitions has been fueled by the increase in the number of business transfers as part of reorganizations and consolidations within groups. The number of equity acquisitions has risen as the review of capital policy became prominent in business trends. Major companies are increasingly turning majority-owned subsidiaries into wholly-owned subsidiaries. Such transactions are sometimes referred to as spin-ins. According to the Tokyo Stock Exchange, 48 publicly listed companies were spun in by their parent

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