Acquiring Firm Target Firm

Particulars Mark Ltd Mask Ltd

Profits after tax (PAT) 500 100 Rs in Lakhs
Number of shares O/s 50 25 Lakhs
P/E ratio (times) 20 10

i Earnings Per Share (EPS) 10 4 Rs/ Share

Current Market Price 200 40 Rs/ Share

Swap Ratio 0.2

For every one share held in Mask Ltd (Target) you'll get 0.2 shares in Mark Ltd (Acquire
or
For every 5 shares held in Mask Ltd (Target) you'll get 1 shares in Mark Ltd (Acquirer)

Profits after tax (PAT)

ii Combined 600 Rs in Lakhs
Number of Shares o/s post
acquisition 55 Lakhs
EPS of Mark Ltd post
acquisition 10.91 Rs/ Share

Expected market price per

share of Mark Limited
iii after acquisition 218.18 Rs/ Share assuming P/E ratio of Mark Limited remains unchanged

Market Value of Merged

iv Firm 12,000 Rs in Lakhs

v EPS Post Merger Pre Merger Gain/(Loss)

Mark Ltd 10.91 10 0.91
Mask Ltd 2.18 4 -1.82

Market Price per share Post Merger Pre Merger Gain/(Loss)

Mark Ltd 218.18 200 18.18
Mask Ltd 43.64 40 3.64

From the above the we can see that shareholders of Mark Ltd (acquirer) is gaining in both EPS and MPS and can be
Where as eventhough shareholders of Mask Ltd (Target) are losing in terms of EPS by Rs -1.82/share the loss is set o
et 0.2 shares in Mark Ltd (Acquirer)

1 shares in Mark Ltd (Acquirer)

Mark Limited remains unchanged

in both EPS and MPS and can be considered the overall winner in this Acquisition
by Rs -1.82/share the loss is set off in terms of gains in MPS of Rs 1.82/share from total gain of 3.64 MPS and the remaining is the actual b
d the remaining is the actual benefit which is 1.82