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DRIVE-Winter
2014
PROGRAM-MBADS
(SEM 3/SEM 5) MBAFLEX/ MBAN2 (SEM 3)
PGDFMN
(SEM 1)-SUBJECT CODE & NAME-MF0011 & MERGERS AND ACQUISITIONS
BK ID-B1732
CREDIT
& MARKS-4 Credits, 60 marks
Q1. Elaborate
on the basic steps in organizing a merger and explain on the five stage model
of mergers and acquisitions.
(Explanation
of basic steps in organizing a merger, Explanation of five stage model of
mergers and acquisitions) 5, 5
Answer.
Basic
steps in organizing a merger
Mergers and
acquisitions are normally decided after thorough examination of all facts and
aspects. Like capital budgeting decisions, these are difficult to reverse once
they are put through, and so the organisation has to be meticulous.
The
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
(Explanation
of the role of industry life cycle, Explanation of prerequisites for creation
of synergy)5,5
Answer.
Role of
industry life cycle
Industry lifecycle has
a crucial impact on mergers and acquisitions. 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
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.
(Explanation
of characteristics of corporate restructuring, Explanation of types of
corporate restructuring) 5,5
Answer.
Characteristics
of corporate restructuring
The key
characteristics of corporate restructuring are:
·
Selling
or closing of unprofitable divisions from its core business, thereby achieving
staff reduction and a stronger balance sheet.
·
Revamping
of corporate management.
·
Sale
of
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.
(Explanation
of modes of LBOs, Governance aspects of LBOs)5,5
Answer.
Modes
of LBOs
There are many types
of financing used in an LBO. These include the following (in order of their
risk):
1.
Senior
debt: The
debt that is at the topmost rank amongst all the other debts and equity capital
in the business is the senior debt. A
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.
(Meaning
of JV with example, Characteristics of JV, Explanation of rationale for JVs, Explanation
of alternatives to JVs as expansion strategy options with example)2,2,3,6
Answer.
Meaning
of JV with example
The term ‘JV’ is an
umbrella term which describes the commercial arrangement between two or more
economically independent entities. In practice, the legal form of a JV is
likely to be determined by a number of factors including the nature and size of
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.
(Explanation
of two methods of amalgamation, Explanation of treatment of goodwill arising in
amalgamation, Explanation of treatment of reserves of amalgamation)5,2,3
Answer.
Methods
of amalgamation
As per AS 14, there
are two method of accounting for amalgamations:
(a) The Pooling of
Interest Method (applicable in case of amalgamation in the nature of merger)
and
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