MF0011 - MERGERS & ACQUISITIONS

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ASSIGNMENT

DRIVE	SPRING 2015
PROGRAM	MBADS – (SEM 3/SEM 5) / MBAN2 / MBAFLEX – (SEM 3) / PGDFMN – (SEM 1)
SUBJECT CODE & NAME	MF0011 - MERGERS & ACQUISITIONS
SEMESTER	3
BK ID	B1732
CREDITS	4
MARKS	60

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.

1 Explain the five stage model of mergers and acquisitions.

Answer : The five stages of merger and acquisition process under 5-S model can be divided as below:

Stage 1: Corporate strategy development:

Corporate strategy is concerned with the ways of optimizing the portfolios of businesses that a firm currently owns and with how this portfolio can be changed to serve the interests of the corporation’s stake holders. Merger and acquisition can serve the objectives of both corporate and business strategies despite their being the

2 What do you understand by demerger? Write about the tax implications of demergers.

Explain the characteristics of demerger.

Answer: Introduction of demerger :

A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components. It is the converse of a merger or acquisition.

A demerger can take place through a spin-off by distributed or transferring the shares in a subsidiary holding the business to company shareholders carrying out the demerger. The demerger can also occur by transferring the relevant business to a new company or business to which then that company's shareholders are issued shares of.

3 Explain about Employee Stock Ownership Plans (ESOP). Write down about the rules of ESOP and types of ESOPS.

Answer : Introduction of ESOP :

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 stock ownership, often at no up-front cost to the employees. ESOP shares, however, are part of employees' compensation for work performed. Shares are allocated to employees and may be held in an ESOP trust until the employee retires or leaves the company. The shares are then sold.

Key rules of ESOP :

4 Write Short notes on :

a. Exchange rates

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

5 Give the meaning of buyback of shares. Explain the objectives and guidelines for buyback of shares.

Answer : Objectives for buyback of shares:

 Stock Price Undervalued

A company's management team may decide to buy back shares for several reasons. One is the view that the shares are undervalued. An overall underperforming stock market or a company that has been hit with a scandal can signal to investors that the share price is worth more by purchasing its own stock. Investors often see this as a positive indicator to buy stock as well.

An extreme example of this was post-"Black

6 Explain the methods of accounting of amalgamation with example.

Answer : Purpose and Scope: This statement deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves. It does not deal with acquisition by one company of the whole or part of the shares, or the whole or part of the assets, of another company in consideration for payment in cash or by issue of shares or other securities in the acquiring company or partly in one form and partly in the other.

Pooling of interests method

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