In the Georeferencing toolbar, view the Link Table by clicking the table icon at the right. The Link table can be moved by dragging.
In the Link Table, turn "Auto Adjust" back on and the image will transform.
If a warning message pops up, don't worry. Click "OK" and a distorted image of the document will appear. Delete lines from in the link table as shown below until the document is back to normal. Then add back the control points, being sure that the first few are in a big triangle pattern rather than a line.
As you add more points, higher levels of transformation become available. Select the one that best transforms your image.
Continue adding points to refine the adjustment. Each set of points acts like a rubber band pulling the image to the grid.
To remove a point, select the corresponding line in the Link Table. Click on the line and the associated link will turn yellow. The numeric values of these points can be edited directly if you want. Press the delete button to remove the line. That point pair will disappear and the curled image will be readjusted if Auto Adjust is on.
Continue adding and deleting pairs of points using the grid as a guide until the area of interest in the curled image is un-warped.
Save the changes to the ArcMap file by selecting “Update Georeferencing” from the dropdown. The control points will then disappear from the Link Table and the image. You can close the Link Table.