MF0011 – Mergers and Acquisitions

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Summer 2013

Master of Business Administration- MBA Semester 3

MF0011 – Mergers and Acquisitions - 4 Credits

(Book ID: B1732)

Assignment-60marks

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q1.Write the types of mergers and acquisitions. Explain the steps to a successful merger.

(Explanation on types of mergers and acquisitions 5marks; Steps to a successful merger 5marks)10 marks

Answer :  Types of mergers and acquisitions :

1. Horizontal Merger :

This kind of merger exists between two companies who compete in the same industry segment. The two companies combine their operations and gains strength in terms of improved performance, increased capital, and enhanced profits. This kind substantially reduces the number of competitors in the segment and gives a higher edge over competition.

2. Vertical Merger :

Vertical merger is a kind in which two or more companies in the same industry but in different fields combine together in business.

Q2.Explain the process of merger. Write down the goals of a merger.

(Process of merger 5marks; Goals of a merger 5marks)10 marks

Answer :  Process of merger :

There are three major steps in a merger transaction: planning, resolution, implementation.

1. Planning :

It is the most complex part of the merger process, entails the analysis, the action plan, and the negotiations between the parties involved. The planning stage also includes:

• signing of the letter of intent which starts off the negotiations;

Q3.What is creating synergy? Explain the prerequisites for the creation of synergy.

(Introduction of creating synergy 2marks; Pre requisites for the creation of synergy( all the 4 points to be explained each carries 2 marks) 8marks) 10 marks

Answer : Creating synergy :

Synergy is a buzzword that managers and HR pros like to bandy around; sometimes they get it and sometimes they really don’t have a clue. In short, synergy happens in the workplace when two or more people working together produce a better outcome than if they did it alone. It is not a touchy-feely concept, but instead is a practical approach to getting results – and it’s not all that difficult to create. Mergers and acquisitions are made with the goal of improving the company's financial performance for the shareholders. Two businesses can merge to form one company that is capable of producing more revenue than either could have been able to independently.

Q4.Give the meaning of Divesture. List and explain the reasons for divesture.

(Meaning of divesture 2marks; Listing of reasons for divesture 3marks; Explanation of reasons for divesture 5marks)10 marks

Answer : Meaning of divesture :

The partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy. Divestiture can be done slowly and systematically over a long period of time, or in large lots over a short time period. For a business, divestiture is the removal of assets from the books. Businesses divest by the selling of ownership stakes, the closure of subsidiaries, the bankruptcy of divisions, and so on. In personal finance, investors selling shares of a business can be said to be divesting their interests in the company being sold.

Reasons for divesture :

1. Divest to Obtain Funds

2. Focusing on Primary Business

Q5.Explain the key rules of Employee Stock Ownership Plans. Discuss the two types of ESOPs.(Key rules of ESOP 5marks ; Explanation on two types of ESOP 5marks)10 marks

Answer : Key rules of ESOP :

1. An ESOP is a kind of employee benefit plan, similar in some ways to a profit-sharing plan. In an ESOP, a company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares. Alternatively, the ESOP can borrow money to buy new or existing shares, with the company making cash contributions to the plan to enable it to repay the loan.

2. Shares in the trust are allocated to individual employee accounts. Although there are some exceptions, generally all full-time employees over 21 participate in the plan.

Q6.Explain the following with examples :

Exchange rates (3marks)

External advantages in different products (3marks)

Role of government policies (4 marks)10 Marks

Answer : Exchange rates :

In finance, an exchange rate (also known as a foreign-exchange rate, forex rate, FX rate or Agio) between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency. For example, an interbank exchange rate of 91 Japanese yen (JPY, ¥) to the United States dollar (US$) means that ¥91 will be exchanged for each US$1 or that US$1 will be exchanged for each ¥91. Exchange rates are determined in the foreign exchange market, which is open to a wide range of different types of buyers and sellers where currency trading is continuous: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday.

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Send your semester & Specialization name to our mail id

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