MF0011 –Mergers and Acquisitions

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Master of Business Administration- MBA Semester 3

MF0011 –Mergers and Acquisitions- 4 Credits

(Book ID: B1209)

Assignment Set- 1 (60 Marks)

Note: Answer all questions (with 300 to 400 words each) must be written within 6-8 pages. Each Question carries 10 marks 6 X 10=60

Q1.Give the meaning of merger and acquisition. What are the key motives behind the merger and acquisitions?

Answer :  Mergers and acquisitions (abbreviated M&A) is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without

Q2.Explain the different types of synergy.

Answer : Word meaning of synergy is combined action or combined work. The word came from Greek word synergia. Meaning of Synergy is getting greater results than the result of sum of the parts. In other words getting more productivity from combined resources is synergy. If you want to put it in more simple way You can say 2+2=5.in context of business management and strategy term came in when a merger

Q3.Merger should be a capital budgeting decision. Explain.

Answer :  When a firm plans to acquire any firm then it should consider the acquisition as a capital budgeting decision. Hence, such a proposal must be evaluated as a capital budgeting decision.

Capital budgeting (or investment appraisal) is the planning process used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research

Q4.Explain the following

(a) Spin-off

Answer : Spin-off, spin off, or spinoff may refer to:

·         Corporate spin-off, a type of corporate transaction forming a new company or entity

·         Spin-Off (game show), a 1975 American game show

·         Spin-off (media), a

(b) Sell-off

Answer : The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the value of the security.

(c) Equity carve out

Answer :  Equity carve-out (ECO or a partial spin-off) is a sort of corporate reorganization, in which a company creates a new subsidiary and IPOs it later, while retaining control. Usually, up to 20% of subsidiary shares is

(d) LBO

Answer : A leveraged buyout (LBO) is an acquisition (usually of a company but it can also be single assets like a real estate) where the purchase price is financed through a combination of equity and debt and in which the cash flows or assets of the target are used to secure and repay the debt. As the debt usually has a lower

(e) ESOP

Answer : An employee stock ownership plan (ESOP) is an employee-owner scheme that provides a company's workforce with an ownership interest in the company. In an ESOP, companies provide their employees with

Q5.Explain the meaning of joint venture. What are the characteristics of joint venture?

Answer : A joint venture (JV) is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee

Q6.What is share warrant and convertible debentures? Calculate fully diluted EPS.

EPS

Presume the following data for an hypothetical target company:

Outstanding shares	10,00,000
Outstanding warrants	2,00,000
Warrant exercise period	2 years
Entitlement to holders	1 share of Rs. 2
Earnings after Tax Rs.	3,00,000
Corporation Tax	45%
Closing Price	12½% convertible
	stock on opening of             the year = Rs. 25.00

Hint : Earnings per share before exercise of warrants = Rs. 0.30

Answer :  A convertible debenture is a bond holding that has a certain right attached to it, usually a right to be converted over to stock if certain conditions are met.

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