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mf0011

mf0011

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Published by: Anilkumarsanctum on Jun 30, 2012
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Spring / February 2012Master of Business Administration- MBA Semester 3MF0011 – Mergers and Acquisitions - 4 Credits(Book ID: B1209)Assignment Set- 1 (60 Marks)Note: Each Question carries 10 marks. Answer all the questions.
Q1.What are the cultural aspects involved in a merger? Give sufficient examples.There are many factors which require attention of the management and tend to widen its role in post-merger integration. A list of such factors is give below in brief:· Legal obligationFulfillment of legal obligation becomes essential in post-merger integration. Such obligationsdepend upon the size of the company, debt structure and controlling regulations, distributionchannels, and dealer net-work, suppliers’ relations etc. In all or some of these cases legaldocumentation would be involved. The rights and the interests of the stake holders should be protected with the new or changed management of the acquiring company. Regulatory bodies likeRBI, Stock Exchanges, SEBI etc would also ensure adherence to their respective guidelines andregulations. It should be ensured at the time of integration that the company out its legalobligations in all related and requisite areas.· Consolidation of operationsAcquiring company has to consolidate the operations, blending the acquired company’s operationswith its own operation. The consolidation of operation covers not only the production process,adoption of new technology and engineering requirements in the production process, but also theentire technical aspects covering technical know-how, project engineering, plant layout, scheduleof implementation, product designs, plant and equipments, manpower requirements, work schedule, pollution control measure etc. in the process leading to the final product.· Installation of top managementMerger and acquisition affect the top management structure. A cohesive team is required at boardlevel as well as senior executive level. Installation of management in the process of integrationinvolves combination of issues related to:· Selection or transfer of managers· Changes in organizational structure
 
· Development of consistent corporate culture, including a frame of reference to guide strategicdecisions making· Commitment and motivation of personnel· Establishment of new leadershipThe integration would involve induction of the directors of the acquired company on the Board of acquiring company, or induction of persons outside who have expertise in directing and policy planning. At top level also, changes are required, particularly depending upon terms and conditionsof the merger to adjust in suitable positions the top executive of the acquired company to createcongenial environment within the organization. The mechanism of corporate control encompassingdelegation of power and power of control, accounting responsibility, MIS and communicationchannels are the important factors to be taken into consideration in the process of integration.· Rationalizing financial resourcesIt is important to revamp the financial resources of the company to ensure availability of financialresources and liquidity. Sometimes on happening of certain uncontrollable events, the financing plans have got to be verified, reviewed and changed.· Integration of financial structureThis is an important aspect which concerns most of stake holders of the company. Generally,financial structure is reorganized as per the scheme of arrangement, merger or amalgamationapproved by the shareholders and creditors. But in the case of takeover or acquisition of anundertaking made by one company of the other through acquiring financial stake by way of acquisition of shares, the integration of financial structure would be a post-merger event whichmight compel the company to change its capital base, revalue its assets and reallocate reserves.· Toning up production and marketing managementWith regard to the size of the company and its operational scale, its production line is to beadjusted during post-merger period. Decisions are taken on the basis of feasibility studies done bythe experts. For tuning up of production, it is also necessary that resources be properly allocatedfor planned programme for utilization of scarce and limited resources available to a firm so as todirect the production process to result into optimal production and operational efficiency.Revamping of marketing strategy is also essential in post-merger integration. This is done on the basis of market surveys and recommendations of the marketing experts. Pricing policy also deserveattention for gaining competitive strength in the different market segments.· Corporate planning and controlCorporate planning to a large extent is guided by the corporate policy. Corporate policy prescribesguidelines that govern the decision making process and regulates the implementation of thedecisions. Control as an activity of management involves comparison of performance with
 
 predetermined standards. In each area of corporate activities whether it is personnel, material,financial – management, planning is associated with control.Q2.Study a recent merger that you have read about and discuss the synergies that resulted from themerger.By merging, the companies hope to benefit from the following:
Staff reductions - As every employee knows, mergers tend to mean job losses. Consider allthe money saved from reducing the number of staff members from accounting, marketingand other departments. Job cuts will also include the former CEO, who typically leaveswith a compensation package.
Economies of scale- Yes, size matters. Whether it's purchasing stationery or a newcorporate IT system, a bigger company placing the orders can save more on costs. Mergersalso translate into improved purchasing power to buy equipment or office supplies - when placing larger orders, companies have a greater ability to negotiate prices with their suppliers.
Acquiring new technology - To stay competitive, companies need to stay on top of technological developments and their business applications. By buying a smaller companywith unique technologies, a large company can maintain or develop a competitive edge.
Improved market reach and industry visibility - Companies buy companies to reach newmarkets and grow revenues and earnings. A merge may expand two companies' marketingand distribution, giving them new sales opportunities. A merger can also improve acompany's standing in the investment community: bigger firms often have an easier timeraising capital than smaller ones.That said, achieving synergy is easier said than done - it is not automatically realized once twocompanies merge.Sure, there ought to be economies of scale when two businesses are combined, but sometimes a merger does just the opposite. In many cases, one and one add up to less than two.Sadly, synergy opportunities may exist only in the minds of the corporate leaders and the dealmakers. Where there is no value to be created, the CEO and investment bankers - who have muchto gain from a successful M&A deal - will try to create an image of enhanced value. The market,however, eventually sees through this and penalizes the company by assigning it adiscounted share price. We'll talk more about why M&A may fail in a later section of this tutorial.Varieties of MergersFrom the perspective of business structures, there is a whole host of different mergers. Here are afew types, distinguished by the relationship between the two companies that are merging:

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