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Solved, MF0011 Winter Drive Assignment

Solved, MF0011 Winter Drive Assignment

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Published by Arvind Kumar
Solved, MF0011 Winter Drive Assignment
Solved, MF0011 Winter Drive Assignment

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Published by: Arvind Kumar on Mar 08, 2012
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 Master of Business Administration - Semester IIIMF0011  Mergers & Acquisitions - 4 Credits Assignment Set- 1 (60 Marks)Note: Each Question carries 10 marks. Answer all the questions.Q1. Explain the types of mergers.
Types of Mergers and AcquisitionsDepending on the kind of combination between the companies Mergers and Acquisition can takeseveral forms. They are categorised as follows:1.
Horizontal:
It is a merger of two competing firms which are engaged in the production ofsimilar products or are providing similar kind of services. The acquiring firm belongs to the sameindustry as the target company. The main purpose of such mergers is to obtain economies of scalein production by eliminating duplication of facilities, widening the product line, reduction ininvestment, elimination of competition in product market, increase market share, reduction inadvertising costs etc.
Examples are:
 (a) PHOENIX ELECTRIC (INDIA) merged with PHOENIX LAMPS (INDIA).(b) VIDEOCON NARMADA ELECTRONICS merged with VIDEOCON INTERNATIONAL LTD.(c) BANK of MADURA merged with ICICI.(d) Acquisition of BLUE DART by DHL WORLDWIDE.(e) Acquisition of THOMSON SA of France by VIDEOCON INDIA. Deal was worth $ 290 million.(f) INDIAN AIRLINES merges with AIR INDIA.2.
Ve
rtical:
When two or more companies involved in different stages of activities like productionor distribution combine with each other the combination is called Vertical merger.An example can be the combination of a car manufacturing company and the companymanufacturing a major component like piston (that is generally bought from others and used bythe car manufacturing company). The acquiring company through merger of another companyattempts to reduce of inventories of raw material and finished goods, implements its productionplans as per the objectives and economizes on working capital requirements.There are two types of vertical combinations.
 
(a)
Forward Integration:
In this kind of vertical combination a manufacturer combines with itscustomer. For example when a TV manufacturer combines with a TV marketing company this iscalled forward integration.(b)
Backward Integration:
In this kind of vertical combination a manufacturer combines with thesupplier of the raw material. For example the combination of car manufacturing company withpiston manufacturing firm would be a backward combination.In other words, in vertical combinations, the merging undertaking would be either a supplier or abuyer using its product as intermediary material for final production.The following are some of the benefits which accrue from the vertical combination to the acquirercompany:(a) Company can safeguard the source of supplies of raw materials or intermediary product.(b) Company is able to get the benefits of savings in transportation costs, overhead costs in buyingdepartment, etc.(c) Company has control over product specifications.3.
C
ircular 
C
ombination:
Companies engaged in the production of different products seekcombination to share common distribution and research facilities in order to obtain economies byelimination of duplication of cost. The acquiring company obtains benefits in the form ofeconomies of resources sharing. Another major advantage is to achieve diversification.
ForCompleteSolvedSMU Assignment @1500 Rs  Email:mba8182@gmail.comPh:09873669404
 
Q2. Firm X is having value of Rs 400 lakh and value of the firm Y is 150 lakh. If thetwo firms combine, the estimated cost savings would have present value of Rs 60lakh. Firm X will have to make payments equal to Rs 170 lakh while making theacquisition. What will be the value of Synergy, Costs and Net Gain from the Merger?Hint: Value of Synergy=60 lakhs , cost = 20 Lakhs , Net gain = 40 lakhsQ3. Merger should be a capital budgeting decision. Explain.Q4. Explain international joint ventures. What are reasons of joint venture failure?Q5. The followingis the balancesheet of XYZ Ltd:LiabilitiesRs. Assets Rs.
 
Share Capital:6000 EquityShares of Rs. 100each, fully paid6,00,000 Goodwill 70,000General Reserve 2,50,000 Plant andMachinery4,60,000Profit & Loss Appropriation A/c80,000 Furniture andFittings1,02,000Bills Payable 70,000 Stock 4,36,000Sundry Creditors 2,45,000 Debtors 1,34,000PreliminaryExpsenses20,000 Cash at Bank 23,00012,45,000 12,45,000Q6. Explain the key regulatory provisions of M&A under:(a) FEMA, 1999(b) Listing Agreement Master

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