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MF0011-Mergers & Acquisitions

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Master of Business Administration - MBA Semester 3
MF0011-Mergers & 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. Steps in a Merger
There are three major steps in a merger transaction: planning, resolution and implementation.
Planning, which 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 may last any length
of time, but once it is complete, the merger process is well on the way.
More in detail, the planning
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
In the introduction stage of the life cycle, an industry is in its infancy. Perhaps a new, unique
product offering has been developed and patented, thus beginning a new industry. Some analysts
even add an embryonic stage before introduction. At the introduction stage, the firm may be
alone in the industry. It may be a small entrepreneurial company or a proven company which used
research and development funds and expertise to develop something new. Marketing refers to
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.
Corporate restructuring is the process of redesigning one or more aspects of a company. The
process of reorganizing a company may be implemented due to a number of different factors,
such as positioning the company to be more competitive, survive a currently adverse economic
climate, or poise the corporation to move in an entirely new direction. Here are some examples of
why corporate restructuring may take place and what it can mean for the company. Restructuring
a corporate entity is often a necessity when the company has grown to the point that the original
structure can no longer efficiently
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
Answer. The acquisition of another company using a significant amount of borrowed money
(bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired
are used as collateral for the loans in addition to the assets of the acquiring company. The
purpose of leveraged buyouts is to allow companies to make large acquisitions without having to
commit a lot of capital.
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
Answer. Joint Venture
A joint venture (JV) is a business agreement in which the 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, joint ventures limited by guarantee with partners
holding shares.
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:
Pooling of interest Method:
Steps involved:
1. The assets, liabilities and reserves are recorded by the transferee company at the current value.
2. The net profit/net loss of the transferor company is aggregated with that of the transferee
company or transferred to the General Reserve, if any.
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