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Summer/May
2012
Master
in Business Administration – Semester 3
MF0011–
Mergers and Acquisitions - 4 Credits
(Book
ID: B1209)
Assignment
Set- 1 (60 Marks)
Note: Each
question carries 10 Marks. Answer all the questions.
Q.1 What
are the cultural aspects involved in a merger. Give sufficient examples.
Answer
: Merger success is possible; however, being part of the 17% that
succeeds, rather than the 83% that does not deliver, requires more than
insight. Merger success is based on acceleration, concentration and creating a
critical mass for operational change (adaptation).
Up to the point in the transaction
where the papers are signed, the merger and acquisition business is
predominantly financial - valuing the assets, determining the price and due
diligence. Before the ink is dry, however, this financially-driven deal becomes
a human transaction filled with emotion, trauma, and survival behavior - the
non-linear, often irrational world of human beings in the midst of change.
The seven pitfalls represent the
critical and vulnerable areas of the M&A transaction. These areas must not
only be valued for their negative impact on the critical success factors that
drove the "deal", they are the very agenda for the organization's
action in the critical first 90 days of the new entity.
In the case of international mergers
and acquisitions, the complexity of these processes is often compounded by the
difference in national cultures. People living and working in different
countries react to the same situations or events in very different manners.
Therefore, a company involved in an
international merger or acquisition needs to consider these differences right
from the design stage if it is to succeed.
The concept of time is also related to
culture. While long-term in North America tends to mean three years, it means
up to 30 years in Japan. Consequently, Japanese strategy discussions are likely
to take into consideration events that Canadians consider irrelevant, since
they are expected to take place beyond the Canadian planning horizon.
Space is also relative. In an
increasingly virtual world, those not "connected" in the same space
and time feel disconnected from the decisions and the center of the action.
Irregular and incomplete communications at headquarters becomes a daunting
challenge for those who live in different time zones, regions, countries and
organizational units.
Only a new culture can create the
context for true change to happen and hold. Changing culture means changing
behavior. One of the quickest way to effect change and create the new company
is to place in all key positions those individuals who are true representatives
of the new culture and who can lead effectively people on both side of the
company's cultural divide.
These pitfalls of mergers and
acquisitions challenge today's leaders to a new standard of managing change.
The strategy is clear - accelerate, concentrate, adapt, and in the case of
international M&As, consider cultural differences. The human and cultural
issues that separate the 17% from the 83% are not about some abstract values or
the "soft stuff", but the concrete reality of productivity, economic
value and sustained growth.
Q.2 What
are the sources of operating synergy?
Q.3
Explain the process of a leveraged buyout.
Q.4 What
are the basic steps in strategic planning for a merger?
Q.5 Study
a recent merger that you have read about and discuss the synergies that
resulted from the merger.
Q.6 What
are the motives for a joint venture, explain with an example of a joint
venture.
Summer/May
2012
Master
in Business Administration – Semester 3
MF0011–
Mergers and Acquisitions - 4 Credits
(Book
ID: B1209)
Assignment
Set- 2 (60 Marks)
Note: Each
question carries 10 Marks. Answer all the questions.
Q.1 List
out the defence strategies in the face of a hostile takeover bid.
Answer : The defense against the acquisition by taking over the shares
listed on any stock exchanges. It explains the concept and various forms of
takeover device prevailing in the corporate world and the technique of
corporate raid as well. You will also understand about the various defensive
mechanisms that can be adopted to face the takeover raid, which in turn focuses
on corporate strategies to avoid takeover raid and the legal measures against
takeovers in India.
Takeover implies acquisition of controlling interest in a company
by another company by taking over of the shares listed on any stock exchange.
It does not lead to the dissolution of the company whose shares are being or
have been acquired. It simply means a change of controlling interest in a
company through the acquisition of its shares by another group. The acquisition
transactions in such shares are subject to the conditions of listing agreement.
When a profit earning company takes over a financially sick company to bail it
out, it is known as ‘bail out takeover’. Such takeovers are in pursuance of a
scheme of rehabilitation approved by public financial institutions. Corporate
takeovers in India are governed by the listing agreement with stock exchanges
and the SEBI Substantial Acquisition of Shares and Takeover (SEBI Code) Code.
The raid, bids and defences are the outcome of takeover. Corporate can stall
such takeover through strategic defensive steps.
Mergers and takeovers are motivated and negotiated under the
dominance of hostility and friendliness pressure and influences and are
accordingly classified as friendly mergers and hostile mergers. The raids, bids
and defences are the outcome of human moods. Corporate wars and offensive
postures can be avoided and can be stalled through defensive steps.
There are two types of takeover bids as discussed below:
Friendly Takeover
Mergers and takeovers could be through negotiations with the
consent of target company’s executives or Board of Directors. Such mergers are
called friendly mergers. These mergers are negotiated mergers and if the
parties do not reach an agreement during negotiations, the proposal stands
terminated.
Hostile takeover
An acquirer company may not offer the target company the proposal
to acquire its undertaking, but silently and unilaterally may pursue efforts to
gain controlling interest in it against the wishes of the management. Such acts
of acquirer are known as “raid” or “Take over raids”. These “raids” when
organized in a systematic way are called “Takeover bids”. Both the raids and
bids, lead to merger or takeover. A takeover is hostile when it is in the form
of “raid”. The forces of competition and product provide strength and weakness
to the rivals in the industry, trade or commerce.
Takeover bid
A takeover bid gives impression of the intention reflected in the
action of acquiring shares of a company to gain control of its affairs. A bid
has been distinguished as below:
Partial Bids
Partial bid is understood when a bid made for acquiring part of
the shares of a class of capital where the offer or intends to obtain effective
control of the offered through voting powers. Such bids are made for equity
shares carrying voting rights. Partial bid is also understood when the offer or
bids all the issued non-voting shares in a company. Regulation 12 of SEBI
Takeover Regulations, 1997, it is necessary to make public announcement in
accordance with the Regulations.
Competitive Bid
This can be made by any person within 21 days of public
announcement of the offer made by the acquirer. Such bid shall be made through
public announcement in pursuance of provisions of regulation 25 of the SEBI
take over regulation 1997. Such competitive bid shall be for the equal number
of shares or more for which first offer was m
Q.2
Discuss the factors in post-merger integration process.
Q.3 What
is the basis for valuation of a target company?
Q.4 What
are the legal compliance issues a company has to adhere to in case of a merger.
Explain through an example.
Q.5 Choose
any firm of your choice and identify suitable acquisition opportunity and give
reasons for the same.
Q.6 Take a
cross border acquisition by an Indian company and critically evaluate.
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