Other restructuration forms

ESOP Employee Stock Ownership Plan

An ESOP is a stock ownership plan for employees. It is, therefore, a plan transmission or delivery of shares to employees of the company.

Two main functions:

1.- The ESOP arise as a defensive or anti-takeover mechanism.

2.- Employees financed so that it can become the largest shareholders of the company without payment on its part or reduce their salaries.

Types of ESOP

A. Unleveraged ESOPs are a type of ESOP in which the company does not borrow to get the money they will give their employees so they can buy the shares to their owners.

B. Leveraged ESOPs are a type of ESOP in which the company borrows to get the money they will give their employees so they can buy the shares to their owners.


– Shares of the company

– Money to buy the company’s shares, because the   objetive is that the employees will become the   owners   of the company or just the shareholders of it.

Leverage ESOP Process:

  • The company creates the fund of the ESOP independently of the company.
  • The fund of the ESOP borrows the money.
  • The ESOP used the funds received (borrowed funds) to buy the shares of the company.
  • The company pays the ESOP with cash to repay the financing. According returns borrowings, loan, will deliver the shares or securities to employees.

Other restructuration forms

Sale or liquidation operations are also considered within the scope of study of mergers and acquisitions. They are considered restructuration decision in companies. This restructuration decisions are used to improve the company management. A company can be split by voluntary or involuntary reasons.

Voluntary reasons:

  • To obtain benefit (selling the part of the company which has no synergies).
  • To achieve a strategic reorganization (selling the company assets which are not in the strategic line of the company).
  • To transfer wealth (Selling assets the company could obtain cash to pay debt or return money to the owners).
  • To access to market’s shares (because it is easier to access to market’s shares to companies which are specialized).
  • Because of tax reasons (If the company is losing money, it can take advantage of it compensating the surplus).

Involuntary reasons:

  • Because of law enforcement.
  • To obtain liability.
  • To dissolve or reorganize mergers.

Sell off

A sell off is the sale of part of the company to someone not related to it.

Spin off

A spin off is sharing among the matrix company’s shareholders, the shares of one of the subsidiary companies. The shares distribution is proportional to the participation of any stockholder.

There are two kinds of spin off:


The total company is divided into different companies. The original company disappeared.


It is a spin off of part of the company, when the shareholders refuse being owners of the matrix company and change the shares by shares of the subsidiary company.

En colaboración la Dra. Inés Martín de Santos.