Business restructuring is a broad concept that goes beyond the traditional understanding of M&A transactions, which, according to its strict linguistic importance, only covers mergers and acquisitions.
The definition of restructuring means, on the basis of its linguistic wording, a change in a particular structure, transformation or transformation.
The concept of restructuring in the context of company transformations should therefore refer to any change in the business structure of economic operators which is permissible under commercial law or civil law.
The most important restructuring activities, in addition to mergers and acquisitions, are the divisions of companies, aports which are both the subject of an organized set of assets, such as an undertaking or its organised part, as well as the individual assets of the entity providing the supply, as well as the sale of shares or shares in commercial law companies. The main restructuring operations to increase the entity’s profitability include mergers and acquisitions. The possibility of increasing market share through restructuring measures is due to the fact that they are in principle carried out in the same or related industries or in functionally related industries. The concept of merger (merger) means merger two or more economic units, as a result of which a new entity is established, which is the successor to the rights and obligations of the merging entities. Mergers, as a rule, are voluntary transformations, usually involving similar size units with comparable market shares. The essence of acquisition or takeover is to obtain control by one, usually a more economically strong entity, over another entity, which is done by purchasing a holding or shares of the acquirer that allows the acquirer to manage and control the acquirer. In contrast to the merger, none of the entities involved in this transformation loses legal personality. The acquisition of other economic units may be both voluntary and hostile. A friendly takeover takes place when the acquirer agrees to the acquisition, which in effect is carried out voluntarily, with the participation, or at least with the approval of the board and owners of the acquirer. However, a hostile takeover (hostile takeover) boils down to acquiring ownership of a given individual against its will. Both mergers and acquisitions are not a uniform form of restructuring of economic units. Basic division of these transformations (by M. Lewandowski, Mergers and acquisitions as methods of growth of enterprises, Poznań 1998) according to the criteria of the business profile of the entities involved in the restructuring concerned, includes:
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- horizontal integration (when combined entities with the same business profile)
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- vertical integration (when units occupying different positions in the production system, e.g. the furniture manufacturer takes over the delivery company, thus gaining control of the new part of the market, i.e. transport of its products),
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- Concentric integration (where the objects of the business of the merging units are similar or linked, but not identical, and the relationships of the merging units are not of a vertical integration nature),
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Conglomerate integration (when objects of business combining units are completely divergent).
This division of mergers and acquisitions is not the only one, according to various criteria different categories of these transformations can be distinguished. In addition to mergers and acquisitions, there are a number of other restructuring activities which take place at least to a certain stage inside the unit.
This category includes divisions of companies and all types of transformations, which are separated from the structure of a given entity by a mass (e.g.
an enterprise, an organised part of the company, a branch of a company or individual assets), as well as the sale (acquisition) of shares or shares which do not always have to lead to the acquisition of an entity whose shares are acquired.
The breakdowns of economic units are a type of restructuring to be carried over to at least two existing or newly established units or on the separation from the structure of the undertaking of the assets, which will then be transferred to another existing or newly bound entity (so-called division by division).
From the perspective of an entity which, due to the division of another entity, receives a specific asset weight, this transformation constitutes an acquisition, and therefore, restructuring of this type only for a shared entity constitutes an internal transformation.
The sale (acquisition) of shares or shares may lead to the acquisition of an entity whose shares are acquired, although from the perspective of the seller of those assets the transaction may only aim at raising capital, in particular when the shares are disposed of third.
The purchase of shares or shares may also constitute a form of investment in certain securities which in the future may be a source of capital gains for an entity acquiring those rights without the intention or actual acquisition of control over an entity whose shares are acquired.
A specific type of conversion is the so-called aports, i.e. non-monetary contributions to commercial companies, in exchange for which the entity receiving the aport releases a certain amount of its shares or shares to the entity making the in-monetary contribution.
The purpose of the aport may be any kind of property or property rights, excluding money, and in particular the undertaking or organised part of the undertaking of the aporter, individual tangible or intangible assets, and shares (shares) in other economic units.
The disposal by the company of part of its assets by the sale of assets is also a form of restructuring, the substance of which may be to dispose of the unexpected advantages of assets or to raise the capital necessary for the planned investments. The last type of corporate restructuring is a change in the legal form of the business.
These transformations can be driven by various business reasons: for example, the transformation of a civil partnership into a limited partnership allows to limit the liability of the company to the amount of the limited liability sum, while the transformation of a limited liability company into a limited liability company allows a company converted into a stock exchange and to raise capital from the issue of shares.
The change in the legal form of the business does not constitute a transformation of the type of disinvestment, since the converted entity does not dispose of any of its assets due to such restructuring.
Therefore, these restructurings are mainly linked to increasing the security of the business, acquiring an external source of financing or developing the most effective form of legal activity.
All of the above conversions of companies do not remain indifferent under tax law, causing a variety of tax implications, the effects of which may sometimes undermine the financial effects of the planned or worse restructuring already carried out.
A contrario regardless of the motives of a strictly business nature, appropriate tax planning may lead to the generation of additional financial benefits due to the intended transformation. The scale of tax advantages can sometimes be a decisive factor in the choice of a particular form of conversion.
For these reasons, the tax aspects of restructuring measures should always be considered as an integral part of them.