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DRIVE: SPRING 2018
PROGRAM:
MBA
SEMESTER:
3
SUBJECT
CODE & NAME: MF0011 & MERGERS AND ACQUISITIONS
Q.1: Explain the types of mergers and acquisitions
(M&A).
Each
type carries 2 marks. Explanation of 5 types
Ans:
Mergers and
acquisitions can take several forms.
1.
Horizontal:
It is a merger of two competing firms engaged in the production of similar
products or providing similar services. The acquiring firm belongs to the same
industry as the target company. The main purpose of such mergers is to obtain
economies of scale in production by eliminating duplication of facilities,
widening the product line,
Q.2:
Explain basic steps in organizing a merger. Explain financial aspects of
mergers
Explanation
of steps in organizing a merger (7 Marks)
Explanation
of financial aspects of merger (3 Marks)
Ans:
Explanation
of steps in organizing a merger:
The steps in an
exercise of organising an acquisition are as follows:
Step 1:
Pre-acquisition review: The preeminent reason for
acquisition is growth, and in this step the company management reviews the
company’s growth plans, alternatives to achieving the growth, and the pros and
cons of each alternative.
Step 2:
Searching and
Q.3:
Explain about Management buyouts (MBO), its motives and structure.
Explanation
of Management buyouts (MBO) (2 Marks)
Motives
behind MBO (4 Marks)
Structure
of a MBO (4 Marks)
Ans:
Explanation
of Management buyouts (MBO):
The management of the
company buys the company, and they may be joined by employees in the venture.
This practice is sometimes questioned because management can have unfair
advantages in negotiations, and could potentially manipulate the value of the company
in order to bring down the purchase price. On the other hand, for employees and
Q.4:
Write Short notes on:
Ownership
decision (3 Marks)
Location
decision (3 Marks)
Role
of government policies in international M&A (4 Marks)
Ans:
Ownership
decision:
The ownership decision
has two dimensions: asset exploiting and asset augmenting. An asset exploiting
firm seeks to deploy, in another country, its strategic assets that have given
it competitive advantage in the home country. These
Q.5:
Explain the types of takeovers. Explain defenses against takeover bids.
Types
of takeovers. (5 Marks)
Defenses
against takeover bids. (5 Marks)
Ans:
Types
of takeovers:
Takeovers are of
different types.
1.
Bailout
takeovers Bailout takeover refers to a substantial acquisition
of shares in a financially weak company in pursuance to a scheme of
rehabilitation approved by a public financial institution or a scheduled bank.
The lead institutions would be responsible for ensuring compliance with the
code. They would appraise the financially
Q.6:
Explain the valuation approaches. Explain the business valuation methods.
Explanation
of valuation approaches (5 Marks)
Explanation
of business valuation methods (5 Marks)
Ans
Explanation
of valuation approaches:
Various methods are
used within these approaches to determine the fair market value of a business.
1
Income-based approach Income-based approach determines fair
market value by multiplying the benefit stream generated by the target
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