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Corporate Restructuring - Case Study Example

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Corporate Restructuring

Organizations need to be more efficient and effective to ward off the challenges of deregulation and hence increased competition. As a result of increased market pressures, it is unavoidable that organizations analyze and redesign all aspects of their business to remain competitive.
Companies around the world are awaking to new realities of an intensively competitive domain and have been undertaking extensive restructuring both at the operational and at the strategic levels. Organizations around the world need to make more decisive choices and take the challenges to leap frog to the next phase of growth. Business portfolios need to be restructured and realigned to assimilate the effects of globalization and deregulation. Companies all over the world are exploring various restructuring methodologies such as Cost cuttings, better customer relationship management, Resource Planning, mergers, takeovers and buy-outs to pursue focused growth.
Citicorp: Citicorp was the descendant of City Bank of New York which was founded On June 16, 1812, with $2 million of capital, later, in 1968 renamed as First National City Bank. Large corporate banking was the core business of Citicorp and was one of the largest banks in the United States at the time of its merger with Travelers Group.
Traveler
Traveler Group: Insurance titan Travelers was founded in 1864 in Hartford, Connecticut. In the 1990s, Travelers went through a sequence of mergers and acquisitions, First with Primerica in 1993 and then Aetna's property and casualty business in 1996. Traveler was the first company in America to insure against accidents and to introduce automobile insurance policy.
Making of the Giant - Acquisition
In October 1996, Citigroup, Inc. was formed after a $70 billion Merger between Citicorp and the Travelers Group. The Travelers Insurance acquisition added property and casualty, and life and annuities underwriting capabilities to the group. It also brought along the Travelers red umbrella logo, which they applied to all the businesses within the group. One notable exception is Citibank, whose logo is Citibank with a red arc over the't'. The Citicorp-Travelers merger has represented a new era of inorganic growth.
Motives behind Merger
The merger of Citicorp and Travelers Group took place in 1998 against the prevailing US laws such as Glass-Steagall Act which prohibited the merger of a bank with an insurance underwriter. In year 1999, before the trial period provided by Glass-Steagall Act could end, new law, Gramm-Leach-Bliley Act which invalidated previous law was framed, this validated the merger. The main official motive behind this merger was expanding their product mix, customer base and ", achieve cost savings and synergies" and "to leave a bigger footprint".
Restructuring after Merger
Weill, then CEO of Traveler Group, proposed a structure of co-CEO's, in order to convince Citicorp to merge, consisting himself and John Reed, CEO of Citicorp. This strategy was believed unworkable by many business research analysts. Former Treasury Secretary Robert Rubin was brought in as a moderator between Reed and Weill . But, conflicts within the company eventually forced Reed to come out of the conglomerate.
Later three co-CEO's were inducted ...Show more

Summary

During the last three decades or so, the global industrial landscape had been completely redrawn by the forces of globalization, deregulation and unprecedented technological development in the field of communication. Companies around the world have responded to the competitive pressures due to these factors through extensive repositioning programs involving mergers, acquisitions, alliances, divestitures and demergers.
Author : glenniepouros
Corporate Restructuring essay example
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