This is the 8th tutorial out of the 9th post tutorial on Investment Banking Basics.
- Part 1 – Investment Banking vs Commercial Banking
- Part 2 – Equity Research in an Investment Bank
- Part 3 – What is Asset Management Company
- Part 4 – Sales and Trading
- Part 5 – Private Placements, IPOs and FPOs
- Part 6 – Underwriters and Market Makers
- Part 7 – Mergers and Acquisitions
- Part 8 – Restructuring and Reorganization
- Part 9 – Investment Banking Roles and Responsibilities
1) Investment Banking Training 99 Course Bundle, 500+ hours
2) Business and Financial Modeling (University of Pennysylvania)
3) Wharton Business and Financial Modeling Capstone (University of Pennysylvania)
4) Introduction to Finance: Valuation and Investing (University of Michigan)
5) Valuing Projects and Companies (University of Michigan)
In this article, we discuss Investment Banking Restructuring and Reorganization.
Investment Banking Restructuring and Reorganization Video
And we have also looked at what is the pitch book brings us to the last part within the investment banking function that is restructuring and reorganization and if you look at restructuring and reorganization this becomes very important in the context of those company which are about to go bankrupt and they are facing margin pressure cash issue and they may want reorganized very quickly so they take help from top investment banks or they may be investment banks can help them strategically as well as restructuring the financial aspects of their equity and debt so investment banks have larger role to play so there are 2 categories 1is reorganizing and 2nd one is restructuring.
Investment Banking – Restructuring
Let us now look at why investments banks are important when it comes to reorganization or restructuring of companies. So why these to required and when it is applicable for different companies you know what happens is many a times companies may not pay doing really good in terms of it’s business and may be facing cost pressure as well as you know they may not be able to pay their own set off cash obligations which may be related to debt etc. So they are these set of companies let’s assume are on the verge of bankruptcy. So what these companies can do is that they can actually opt for either of the 2 or in fact mix for both one of them being called as restructuring and other one is called reorganization and for these 2 activities investor bankers come handy. So what is restructuring and how investor bankers can help? So since let’s say there is huge debt that is piled up in company ABC so restructuring would mean that let’s say selling of part of the assets in order to kind of meet the cash obligation or pay off paying of the debt that normally happens second it could be that converting a part of debt into securities. So that you know those who are bond holders they would gets stocks in return to debt amount and it can also mean that the company can be sold entirely so investment bankers can help restructuring the original deal with the financers and kind of you know find a mid way out between this is done primary to rescue the firm from bankruptcy which will ultimately lead to nothing but just sell company where you know only the debt holder may able to recover only partial amount. So this is where investment banker can actually be handy.
Investment Banking – Reorganization
Second part involves reorganization and reorganization means that you are re-organizing the company’s strategy all together may be you know focus so earlier may be the company was into emerging markets, but probably you may not have the appetite for paying for such products which we are into so just realigning the strategy from emerging markets to let’s say developed markets you know that can actually help. So the investment bankers actually take a role of consultant analyze completion help the management look at the new focus areas and you know help them revive their financials. It may also lead to the change in management. So all these things reorganization and restructuring are done by investment bank for a fee. So it can be standard fee or it can be fee which is based on performances so that’s where again investor bankers play a good role to look at. With this we hope that now fully understood restructuring as well so I hope you know this provided good glimpse different kind of function of investment banking.