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Winter-2014
Master of
Business Administration- MBA Semester 3
MF0011–Mergers
and Acquisitions-4 Credits
(Book ID:
1732)
Assignment
(60 Marks)
Note:
Answers for 10 marks questions should be approximately of 400 words. Each
question is followed by evaluation scheme. Each Question carries 10 marks 6 X
10=60.
Q1.Elaborate on the basic steps in organizing a merger and
explain on the five stage model of mergers and acquisitions.
Answer. Basic steps in organizing a merger
The evaluation and
negotiation of a merger are a major business decision. Your attorney, auditor,
and banker are important sources of expertise and assistance. Other outside resources
include business consultants, regional cooperatives, and university experts. Each
merger situation is different, but
Q2.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.
Answer. Role of industry life cycle
The different stages of industry lifecycle are:
Fragmentation Stage: The first stage of the new industry is referred to
as fragmentation. In this stage, the new industry develops the business. The
entrepreneur plans on how to introduce new products or services into the
market. The twin problems of innovation and invention are overcome by the
entrepreneur at
Q3.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.
Answer.
Corporate restructuring is one of the most complex and
fundamental phenomena that management confronts. Each company has two opposite
strategies from which to choose: to diversify or to refocus on its core
business. While diversifying represents the expansion of corporate activities,
refocus characterizes a concentration on its core business. From this
perspective, corporate restructuring is reduction in diversification.
Q4.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.
Answer. A leveraged buyout (LBO) is an acquisition (usually of a
company but, can also be single assets such as a real estate property) 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. Since the debt, be it senior or mezzanine, always has a lower cost of
capital than the equity, the
Q5.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.
Answer. Meaning of JV with example
A joint venture (JV) is a business agreement in which parties
agrees 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
Q6.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.
Answer. 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 use of
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