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CORPORATE RESTRUCTURING - FUNDING OF MERGER AND TAKEOVERS

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..... re addition of the present values of each individual company. Various types of Financial instruments used for funding 1.Funding through Equity Shares - Equity Share Capital can be considered as the permanent capital of a company. Equity needs no servicing as a company is not required to pay to its equity shareholders any fixed amount return in the form of interest which would be the case if the company were to borrow issue of bonds or other debt instruments. In issue of Equity shares, the commitment will be to declare dividends consistently if profit permits. 2.Funding through Preferential Allotment - Private placement in the form of a preferential allotment of shares is possible and such issues could be organized in a much easier way ra .....

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..... tion in the target company, using the same ratio as that of the proposed transaction. 7.Funding through Employees Stock Option Scheme - This option may be used along with other options. ESOP Scheme is a voluntary scheme on the part of a company to encourage its employees to have a higher participation in the company. Stock option is the right but not an obligation granted to an employee. Only bonafide employees of the company are eligible for shares under scheme. The option granted to any employee is not transferable to any other person. 8.Funding through External Commercial Borrowings - ECB refers to commercial loans in the form of bank loans, buyers' credit, supplier' credit, securitized instrument such as Floating Rate Notes and Fixed .....

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..... the financial institutions and the banks having financial stakes in the acquire company to ensure rehabilitation and recovery of dues from the acquirer. 13.Funding through Leveraged and Management Buyouts - Options available for the revival of a 'sick company'. One is buyout of such a company by its employees. It has distinct option over Government intervention and other conventional remedies. Leveraged Buyout is defined as the acquisition by a small group of investors, financed largely by borrowing. The buying group forms a shell company to act as the legal entity making the acquisition. it is different from ordinary acquisition as a large fraction of purchase price is debt financed and the shares of Leveraged Buyout are not traded on o .....

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