MF0011 & MERGERS AND ACQUISITIONS

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ASSIGNMENT

DRIVE	WINTER 2015
PROGRAM	MBADS (SEM 3/SEM 5) MBAFLEX/ MBAN2 (SEM 3) PGDFMN (SEM 1)
SUBJECT CODE & NAME	MF0011 & MERGERS AND ACQUISITIONS
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.

Q.1 Elaborate on the basic steps in organizing a merger and explain on the five stage model of mergers and acquisitions.

Ans: Explanation of basic steps in organizing a merger :

Step 1-Informal Discussion:

The first step of the process involves an informal discussion by the board of directors. The board should consider the history of the cooperative, the present status, and, above all, what the cooperative should do to survive, prosper, and meet members’ needs.

Step 2-The Merger Steering Committee:

Q.2 Synergy is the additional value that is generated by the combination of two or more than two firms creating opportunities. Explain the role of industry life cycle and pre requisites for creation of synergy.

Ans : Explanation of the role of industry life cycle :

Life cycle models are not just a phenomenon of the life sciences. Industries experience a similar cycle of life. Just as a person is born, grows, matures, and eventually experiences decline and ultimately death, so too do industries and product lines. The stages are the same for all industries, yet every industry will experience these stages differently, they will last longer for some and pass quickly for others. Even within the same industry, various firms may be at different life cycle stages. A firms strategic plan is likely to be greatly influenced by the

Q.3 Corporate restructuring is a broad based business initiative that results in major change of size, ownership, control and/or management. Write down the characteristics of corporate restructuring and explain the types of corporate restructuring.

Ans :  Characteristics of corporate restructuring :

1. To improve the company’s Balance sheet, (by selling unprofitable division from its core business).

2.To accomplish staff reduction ( by selling/closing of unprofitable portion)

3.Changes in corporate management.

4.Sale of underutilized assets, such as patents/brands.

5.Outsourcing of operations such as payroll and technical support to amore efficient 3rd party.

6.Moving of operations such as manufacturing to lower-cost

Q. 4 Leveraged Buyouts (LBO) is a financing technique of purchasing a private company with the help of borrowed or debt capital. Explain the modes of LBO financing and governance aspects of LBOs.

Ans : Explanation of modes of LBOs :

LBOs are typically used for three purposes, each in the category of corporate acquisitions generally. These are 1) taking a public company private, 2) financing spin-offs, and 3) carrying out private property transfers frequently related to ownership changes in small business.

Public to Private

The first situation arises when an investor (or investment group) buys all of the outstanding stock of a publicly traded company and thus turns the company into a privately-held enterprise ("taking private" in reverse of "going public").

Q. 5 Joint Ventures (JV) have become an important strategic option for many businesses. Give the meaning of JV with example. Explain the characteristics of Joint Ventures. Also explain the Rationale for Joint Ventures and alternatives to JV’s as expansion strategy options with example.

Ans : Meaning of JV with example :

A joint venture (JV) is a project or enterprise in which multiple companies or individuals invest. Participants usually share equally in the project's direction and profits. A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity.

Q. 6 Amalgamation is the nature of merger is an amalgamation/consolidation which satisfies/ meets the following conditions. Explain the two methods of amalgamation. Explain the treatment of Goodwill arising on Amalgamation and treatment of reserves of amalgamation.

Ans : Explanation of two methods of amalgamation :

There are two main methods of accounting for amalgamations:

(a) the pooling of interests method; and

(b) the purchase method.

1. The Pooling of Interests Method :

Under the pooling of interests method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts. If, at the time of the amalgamation, the transferor and the transferee companies

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