Seat No.: ________ Enrolment No.

___________

GUJARAT TECHNOLOGICAL UNVERSITY

MBA SEMESTER-4– EXAMINATION – SUMMER 2020
Subject Code: 4549222 Date:05/11/2020
Subject Name: Finance_Corporate Restructuing and Valuation (CRV)
Time: 10:30 AM TO 1.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figurestotherightindicatefullmarks.

Q. No. Marks
Q.1 Definitions 14
(a) Tender offer
(b) Intangibles
(c) Replacement Value
(d) Buyback
(e) Poison Pill
(f) Proxy fight
(g) Fair Value

Q.2 (a) “While due diligence is not an insurance against a bad deal, it certainly 07
provides enough assurance that the due diligence is per se not bad.” In
context of above statement explain the concept of due diligence and major
types of due diligence in brief

Page 1 of 5
 (b) Following is the balance sheet of Zainul ltd. 07
(Rs lakh)
Liabilities Amount Assets Amount
Share capital
80,000 11% preference
share of Rs. 100 each, 80 Fixed Assets 300
fully paid
2,40,000equity share of
Less:
Rs. 100 reach fully paid 240 60
Depreciation
up
P/L account 46 240
10 % Debenture 40 Current assets 0
trade creditor 142 stocks 200
Provision for income tax 16 debtor 100
cash and bank 20
preliminary exp 4
564 564

Additional information:
i. A firm of professional provided following market estimates: Fixed
assets Rs. 260 lakh, debtors 90 lakh. All other assets are constant.
ii. The company is yet to declare and pay dividend on preference share.
iii. Liquidation values are : Fixed assets Rs. 210 lakh, stock 180,
liquidation cost 30.

You are required to calculate NPV as per Book value, Market value,
and liquidation value.

OR

(b) Mondel Ltd is growing at an above average rate. If foresees a growth rate of 07
20%per annum in free cash flow to equity holders in the next 4 years. It is
likely to fall to 12% in the next two years. After that, the growth rate is
expected to stabilize at 5% per annum. The amount of FCFE per equity share
at the beginning of the current year is Rs. 10. Find the maximum price at
which an investor, follower of the free cash approach, will be prepared to buy
the company’s share as on date, assuming an equity capitalization rate of
14%.

Q.3 (a) What is valuation? What are factors that should be borne in mind while 07
valuing a business?
(b) ABC Ltd plans to acquire ACC Chemical. The following information is 07
available
Particulars ABC Ltd ACC Chemical
Total Current Earnings Rs. 36 Million Rs. 12 Million
No. of Outstanding Shares 12 Million 8 Million
Market Price per Share Rs. 30 Rs. 9

(1) What is the maximum exchange ratio acceptable to the shareholders of

ABC ltd. if the P/E Ratio of the combined entity is 8?

Page 2 of 5
 (2) What is the minimum exchange ratio acceptable to the shareholders of
ACC Chemical if the P/E Ratio of the combined entity is 9?
(3)At What points do the lines of ER1 and ER2 intersects

OR
Q.3 (a) “ The discounted cashflow (DCF) approach is conceptually the most ideal 07
among various approaches for the business valuation.” Justify this
statement
(b) COX Company plans to acquire FOX Company. The relevant financial 07
details of the two firms, prior to merger announcement, are given below:
Particular COX Company FOX Company
No. Of share 300000 200000
Market Price per share Rs. 60 Rs. 25
The merger is expected to bring gains which have a present value of Rs. 4
million. COX Company offers one share in exchange for every two shares
of FOX Company.
(a) What is the true cost of COX Company for acquiring FOX Company?
(b) What is the net present value of the merger to COX Company?
(c) What is the net present value of the merger to FOX Company?

Q.4 (a) Explain with an example comparable company and transaction analysis 07
method.
(b) Videsh Ltd. Is keen on reporting EPS of Rs. 6 per share after acquiring 07
Swadesh Ltd. The following financial data are given
Particulars Videsh Ltd. Swadesh Ltd.
Earnings Per Share Rs. 5 Rs. 5
Market Price Per Share Rs. 60 Rs. 50
Number of shares 10,00,000 8,00,000
There is an expected synergy gain of 5 per cent. What exchange ratio will
result in a post-merger EPS of Rs.6 for Videsh Ltd.?
OR
Q.4 (a) What are the reasons to conduct intangible valuation? Also, explain in brief 07
valuation of brands and human Resource.
(b) Manager of PQR ltd. is planning to buy Shiva ltd. following information is 07
available about Shiva ltd. the company is having earing per share Rs. 4.
Capital expenditure Rs. 3. Depreciation per share Rs. 2.50. change in
working capital Rs. 0.5. expected growth is 9%. Risk free rate of return is
8%. Market risk premium is 6%. Calculate the market value per share of
Shiva Ltd.

Page 3 of 5
Q.5 CASE STUDY:
MERGER OF ICICI WITH ICICI BANK: A Reverse merger

ICICI Limited
ICICI Limited was basically a Development Financial Institution providing
medium-term or long-term project finance to industries in India. It was
formed in 1955 at the initiative of the World Bank, the Government of India
and representatives of Indian industry. Initially it focused on project finance
and providing long-term funds to a variety of industrial projects.
Subsequently, it diversified into venture capital financing, commercial
banking asset management and management of mutual funds brokering and
marketing, internet stock trading, housing finance etc.
ICICI Bank
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian
financial institution, and was its wholly-owned subsidiary. ICICI’s
shareholding in ICICI Bank was reduced to 46% through a public offering of
shares in India in fiscal 1998, and an equity offering in the form of ADRs
listed on the NYSE in fiscal 2000.
RBI Announcement
The RBI announced in April 2001 that it would consider proposals from
Development Financial Institutions wishing to transform themselves into
banks.
The Merger
After consideration of various corporate structuring alternatives in the
context of the emerging competitive scenario in the Indian banking industry,
and the move towards universal banking, the managements of ICICI and
ICICI Bank formed the view that the merger of ICICI with ICICI Bank would
be the optimal strategic alternative for both entities, and would create the
optimal legal structure for the ICICI group’s universal banking strategy. The
merger would enhance value for ICICI shareholders through the merged
entity’s access to low-cost deposits, greater opportunities for earning fee-
based income and the ability to participate in the payments system and
provide transaction-banking services. The merger would enhance value for
ICICI Bank shareholders through a large capital base and scale of operations,
seamless access to ICICI’s strong corporate relationships built up over five
decades, entry into new business segments, higher market share in various
business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries
In October 2001, the Board of Directors of ICICI and ICICI Bank approved
the merger of ICICI and two of its wholly-owned retail finance subsidiaries,
ICICI Personal Financial Services Limited and ICICI Capital Services
Limited, with ICICI Bank.
The merger was approved by shareholders of ICICI and ICICI Bank in
January 2002, by the High Court of Gujarat at Ahmedabad in March 2002,
and by the High Court of Judicature at Mumbai and the Reserve Bank of
India in April 2002.
Consequent to the merger, the ICICI group’s financing and banking
operations, both wholesale and retail, have been integrated in a single entity.

(a) Is ICICI Ltd. A development bank? Provide support for your answer 07
(b) Why is the merger between ICICI Ltd.? And ICICI Bank termed as 07
“Reverse merger” explain the need for such corporate restructuring
OR

Page 4 of 5
Q.5 (a) Briefly highlight major activities towards the merger of ICICI ltd and ICICI 07
bank merger
(b) Discuss the benefits and problems associated with reverse merger 07

*************

Page 5 of 5
Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA – SEMESTER - IV – EXAMINATION – WINTER 2021

Subject Code: 4549222 Date: 24/12/2021

Subject Name: Corporate Restructuing and Valuation
Time:10:30 AM TO 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q. Question Text and Description Marks

No.
Q.1 Define the following terms: 14
(a) Tender Offers
(b) Transaction Analysis
(c) ESHOPs
(d) White knight & poison put
(e) Reverse merger
(f) LBO & MBO
(g) Green mail & crown jewel
Q.2 (a) Explain the various approaches to corporate valuation in detail. 07
(b) What do you mean by take over? Explain the benefits of takeover and its 07
disadvantages in detail.
OR
(b) Define Corporate Restructuring. Explain various forms of corporate restructuring in 07
detail.

Q.3 (a) What do you mean by takeover? Explain various anti takeover tactics/strategies. 07
(b) Firm A is planning to acquire Firm B. The relevant financial information of the two 07
firms prior to the merger announcement are as follows:

particulars Firm A Firm B

Market Price per share Rs. 75 Rs. 30
Number of shares 1000000 500000
Market value of the firm 7,50,00000 1,50,00000

The merger is expected to bring gains which have present value of Rs.1.5 crore. Firm
A Offers 250000 shares in exchanging for 5 lakh share to the shareholders of firm B.
You are required to determine:
(i) Total value of Firm AB (PVAB) after Merger
(ii) Gains to the share holders of firm A
(iii) True cost of acquiring Firm B and net present value of the merger to Firm
B.

OR
Q.3 (a) Explain the various motives and barriers for corporate restructuring 07
(b) What do you mean by LBO and MBO? Explain the common characteristics of LBO 07
and Motivation behind LBOs.
Page 1 of 3
Q.4 (a) What do you mean by acquisition? Discuss the motives behind merger. How 07
acquisition is different from takeover? Explain the various types of acquisition.
(b) Company X wishes to Take over the Company Y. The financial details of the two 07
companies are as under:
Particulars Company X Company Y
Equity shares ( Rs. 10per 100000 50000
share)
Shar premium account …….. 2000
P & L account 38000 4000
Preference shares 20000 …..
10% debentures 15000 5000
total 173000 61000
Total Assets 173000 35000
Maintainable annual 24000 15000
profits(after tax) for equity
shareholders
Market Price per share 24 27
Price earnings ratio 10 9
Determine the exchange ratio for this take over.
OR
Q.4 (a) Discuss the Divestiture in detail. Explain different forms of divestment 07

(b) The Xyz Ltd. wants to Acquire ABC Ltd. by exchanging its 1.6for every share of ABC 07
Ltd. It anticipates to maintain the existing P/E ratio subsequent to the merger also. The
relevant financial data are as under:
XYZ Ltd. ABC Ltd.
Earnings after taxes (EAT)(Rs.) 1500000 450000
Number of equity shares outstanding 300000 75000
(N)
Matket Price per share (MPS)(Rs) 35 40

What is the exchange ratio based on market prices?

What is the premerger EPS and P/E ratio of each company?
What is EPS of XYZ company after acquisition?
What is expected market price per share of merged company?

Page 2 of 3
Q.5 The Hypothetical Limited wants to acquire Target Ltd. The balance sheet of Target
Ltd. as on March 31st (current Year) has the following assets and Liabilities:

(Rs. In Lakh)
Liabilities Amount Assets Amount
Equity share capital( 400 Cash 10
4 lakh shares of Rs.
100 each)
Retained Earnings 100 Debtors 65
10.50% Debentures 200 Inventories 135
Creditors and other 160 Plant and 650
Liabilities Equipments
860 860
Additional information:
 The shares of Target Ltd. will get 1.5 shares in Hypothetical Ltd. for every
share; the shares of Hypothetical Ltd. would be issued at its current market
price of Rs. 180 per share. The debenture holders will get 11% debenture of the
same amount. The external liabilities are expected to be steeled at Rs. 150
Lakh. Dissolution expenses of Rs. 15 lakh are to be met by the acquiring
company.
 The following are projected incremental Free Cash flows(FCFF) expected from
acquisition for 6 years (Rs. Lakh):
Year -end Rs. In Lakh

1 150

2 200

3 260

4 300

5 220

6 120

 The free cash flow of Target Limited is expected to grow at 3% per annum,
after 6 years.
 Given the risk complexion of Target Limited, cost of capital for Target Limited
cash flows has been decided at 13%
 There is unrecorded liability of Rs. 20 lakhs

(a) Determine Cost of acquisition of Target Limited. 07

(b) What is the present value of FCFF? 07
OR
Q.5 (a) Determine the PV of FCFF and Terminal Value. 07
(b) Is it is assumed that the cost of acquisition is Rs. 900 Lakh, What is the value of 07
Benefit of acquisition to the Hypothetical Limited.
*************

Page 3 of 3
 Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA - SEMESTER– IV EXAMINATION – WINTER 2020
Subject Code:4549222 Date:05/01/2021
Subject Name:Specialization-Finance_Corporate Restructuing and
Valuation (CRV)
Time:02:00 PM TO 04.00 PM Total Marks: 47
Instructions:
1. Attempt any THREE questions from Q1 to Q6.
2. Q7 is compulsory.
3. Make suitable assumptions wherever necessary.
4. Figures to the right indicate full marks.

Q.1 Explain following terms in brief:

(a) 1) Corporate Restructuring 06

2) Synergy
3) Cross Border Acquisition

(b) 1) ESOP 06
2) Liquidation Value
3) Lollipop defense

Q.2 (a) Differentiate Mergers & Acquisition with suitable latest examples. Also discuss 06
various motives for M&A

(b) What is takeover? Explain various forms of takeover. 06

Q.3 (a) Ansh Ltd. wants to acquire Archi Ltd and has offered a swap ratio of 1:2 (0.5 06
shares for every one share of Archi Ltd.). Following information is provided :

Particular Ansh Ltd. Archi Ltd.

Profit after tax Rs. 2,000 lakhs Rs. 400 lakhs
Equity shares outstanding (Nos.) 200 lakhs 100 lakhs
PE Ratio 10 times 5 times

You are require to find out,

a. What is the swap ratio based on current market price?
b. What is the EPS of Ansh Ltd. after the acquisition?
c. What is the expected market price per share of Ansh Ltd.
after the acquisition, assuming its PE multiple remains
unchanged?
d. Determine the market value of the merged firm.

(b) Explain Spin Off, Split-Ups, Equity carve out in detail with suitable examples. 06

Page 1 of 3
Q.4 (a) Discuss the various approaches of Valuation in detail. 06

(b) What is due diligence? Also discuss types of due diligence. 06

Q.5 (a) Hirva Ltd furnishes following information. 06

Share Capital:
 55,00,000 Equity Shares of Rs. 10 each. (Fully Paid Up)
 5,50,000 10 % Preference shares of Rs. 100 each. (Fully Paid Up)

Liability to Outsiders : Rs. 75,00,000

Reserve & Surplus : Rs. 45,00,000

Out of total assets Fictitious Assets are of Rs. 41,00,000

The average normal Profit after taxation earned very yea by the company during
the last five years Rs. 85,05,000

The Normal Profit earned on the market value of fully paid up equity shares of
similar companies is 12 %

Calculate the Fair Value of an Equity Share.

Q.5 (b) Explain AS 14 and also discuss various methods of Accounting. 06

Q.6 (a) From the Following information of Dhairyaa Ltd, Find out Value of Share 06
 Earning Per Share – Rs. 4
 Capital Expenditure – Rs.3
 Depreciation per Share – Rs. 2.5
 Working Capital – Rs. 0.5
 Expected Growth – 9%
 Beta Co-efficient – 0.9
 Risk Free Rate of Return – 8%
 Market Risk Premium – 6%

Q.6 (b) Discuss the various methods of Valuation of Human Resources. 06

Q.7 CASE STUDY

Walmart`s Entry into Indian Online Retail through Flipkart Acquisition

Flipkart is an Indian e-commerce company. It was founded by Sachin Bansal and Binny
Bansal in 2007. The company initially focused on book sales, after that expanding into
other product categories such as consumer electronics, fashion, home essentials &
groceries, and lifestyle products.

On 4 May 2018, it was reported that the US retail chain Walmart had won a bidding war
with Amazon to acquire a majority stake in Flipkart for US$15 billion. On 9th May
2018, Walmart officially announced its intent to acquire a 77% controlling stake in
Flipkart for US$16 billion, a valuation of over $20 billion subject to regulatory
approval. Following the proposed purchase, Flipkart co-founder Sachin Bansal left the
company, while the remaining management now report to Marc Lore, CEO of Walmart

Page 2 of 3
eCommerce US. Walmart president Doug McMillon cited the "attractiveness" of the
market, explaining that their purchase "is an opportunity to partner with the company
that is leading transformation of eCommerce in the market". Indian traders protested
against the deal, considering the deal a threat to domestic business.

Walmart acquired a majority stake in Flipkart, the largest online marketplace in India.
This is also the biggest ever deals in the history of Walmart, which is trying hard to
expand in the online retail business around the world to compete with its rival Amazon.
Amazon global is a leading e-commerce portal and Walmart wants to compete against it
online and in fact wants to stay ahead of Amazon, hence it considered few points before
taking this decision. India is the only place Walmart could look at to fulfill its dream
after China because the scope of development in India is more than any country for its
size and growth rate. The customer base for Flipkart is more than Amazon India and
Flipkart is growing rapidly every year and for fiscal year ending 2018. Bansals’
approach towards innovation, scope of development and management skills has
impressed Mc Millan (President and CEO of Walmart) to think further on the
acquisition – though Flipkart is nowhere close to profits.

While the deal is expected to generate synergies for both Walmart and Flipkart,
Walmart will have to face challenges as Flipkart has accumulated losses of US$3.6
billion and these are not going to decrease in the near future because of the deep
discount strategy followed by Indian online retailers. It is high time the management of
Walmart developed some foolproof plan to reduce Flipkart’s losses and keep its number
one position intact while competing with Amazon in the Indian market.

Apart from the investment, Flipkart received US$2 billion additionally for it’s vision to
accelerate growth directly benefiting its customers. Flipkart’s own supply chain arm
eKart serves approximately more than 800 cities, delivering 5 lakh products in an
average daily. With this deal, Walmart will bring in grocery and merchandise supply-
chain knowledge and financial strength, and Flipkart will make the most of the merger
to grow into a listable (part of the visigiant quickly. Walmart’s main rival Amazon India
is leaving no stone unturned when it comes to adoption of newer technology.
.

(a) Discuss the core objectives behind acquisition of Flipkart by Walmart. 5.5
(b) Analyze the challenges and the growth strategies of Walmart at global market 5.5
OR

(a) Evaluate the impact of merger and acquisition on Indian e-commerce Industry. 5.5
(b) Analyze the acquisition of Flipkart by Walmart and its potential synergies from 5.5
the view point of Flipkart.

Page 3 of 3
Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA – SEMESTER ( 4) – EXAMINATION – SUMMER 2019

Subject Code: 3549221 Date: 04/05/2019

Subject Name: Mergers & Acquisition (M & A)
Time:10:30 Am to 1:30 Pm Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q. No. Question Text and Description Marks

Q.1 Explain following terms: 14
(a) Equity Carve out
(b) Demerger
(c) Crown jewel defense
(d) Conglomerate merger
(e) Joint venture
(f) Diversification
(g) Leverage buyouts

Q.2 (a) What is corporate restructuring? Explain various forms of corporate 7

restructuring.

(b) What is due diligence? What are the various areas in which due 7
diligence is carried on?
OR
(b) Explain the difficulties companies faces in cross border acquisitions. 7

Q.3 (a) What is takeover? Explain various forms of takeover. 7

(b) Write a short note on : ESOP 7

OR
Q.3 (a) Following are the particulars of two companies, A Ltd and T Ltd: 7
You are required to calculate exchange ratio and value of firm based
on Market price. Consider A Ltd as Acquirer & T Ltd as Target firm
Particulars A ltd T Ltd
EAT (Rs) 2,00,000 60,000
No. of equity shares outstanding 8000 4000
P/E ratio 8 5
(b) What are the conditions that have to be satisfied for an 7
amalgamation to qualify as “amalgamation by way of merger”?

Q.4 (a) Explain SEBI Buyback of Securities Regulations. 7

Page 1 of 3
 (b) Write short note on: Competition act 7

OR
Q.4 (a) Write a short note on three recent acquisitions in India 7

(b) What are the transactions in relation to amalgamations and 7

demergers that are not charged to capital gains tax and why?

Q.5 In 2014, Flipkart acquired Myntra.com marking the biggest

consolidation in the e-commerce space in India, home grown e-
retailer Flipkart acquired online fashion retailer Myntra in an
estimated Rs 2,000 crore deal. As part of the acquisition, Myntra co-
founder Mukesh Bansal joined Flipkart's board and also oversee
Flipkart's fashion business. Flipkart and Myntra remain as two
separate entities, but people holding stock options in Myntra now
hold the same in Flipkart. The deal appears to be win-win for both
companies, and could be the making of a giant company, better
positioned to address India's growing demand for online retail-one
that could put up strong competition against rivals Flipkart, which
also operates under the marketplace model allowing retailers to offer
products on its platform, has since its inception raised over $500
million.

By joining forces, Flipkart and Myntra realized huge cost savings

on customer acquisition as they basically target the same customer
and demographic base. Combined company control the major E-
Commerce of India resulting insignificant economies of scales.
Amazon, with its well machinery, is ready to fight against all players
of E-Commerce in India which both Flipkart and Myntra are able to
face as a combined entity. Both the ventures have created huge
brand values and do share synergy in the online business.

The merger exploited this synergy in creating greater value as a

whole. Both Myntra and Flipkart have been trying hard to raise
funds for expanding their business. The combined entity found it
easier to approach potential investors who might be lured by the
combined market share these two may provide across categories. As
mentioned in the article already, Myntra and Flipkart can leverage
their existing infrastructure to provide better service and increase
customer base.

(a) Explain advantages of acquisition to both parties involved in above 7

case.
Page 2 of 3
 (b) Explain various methods of valuation which can be used by acquirer 7
in above case.

OR
Q.5 (a) Explain various takeover defence tactics which could be used by 7
target firm in above case.
(b) Explain difficulties faced by acquirer and target in successful 7
implementation of acquisition. And also state how to overcome such
challenges.

*************

Page 3 of 3
Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA - SEMESTER– IV EXAMINATION – WINTER 2019
Subject Code: 3549221 Date: 30-11-2019
Subject Name: Mergers & Acquisition (M&A)
Time: 2.30 PM to 5.30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.

Q.1 Explain the following Terms: 14

a. Corporate Restructuring
b. Spin Off
c. Consolidation
d. ESOP
e. Reverse Merger
f. Leverage Buy Out
g. Synergy
Q.2 (a) Differentiate Mergers & Acquisition. Discuss various motives for M&A 07
citing recent examples of M&A in India.
(b) Write a note on Competition Act for M&A. 07
OR
(b) Discuss the provisions for M&A under Companies Act 2013. 07
Q.3 (a) What is due diligence? Discuss various types of due diligence. 07
(b) What is takeover? What are the different takeover defense tactics? 07
OR
Q.3 (a) Explain the concept of divestitures. Why do companies seek divestitures? 07
What are the benefits of divestitures?
(b) Explain the concept of cross border acquisitions and state the problems 07
encountered in cross border acquisitions.
Q.4 (a) Highlight the differences between the Pooling of Interest Method & 07
Purchase Method with respect to Accounting Standard 14.
(b) A Ltd wants to acquire T Ltd. and has offered a swap ratio of 1:2 (0.5 07
shares for every one share of T Ltd.) Following information is provided:
Particulars A Ltd T Ltd
Profit after tax Rs. 18,00,000 Rs. 3,60,000
Equity Shares Outstanding 6,00,000 1,80,000
Earnings Per Share 3 2
Price Earnings Ratio 10 times 7 times
Market Price Per Share Rs. 30 Rs. 14
Required:
1. The number of equity shares to be issued by A Ltd for acquisition of T
Ltd.
2. What is the EPS of A Ltd after the acquisition?
3. Determine the equivalent earnings per share of T Ltd.
4. What is the expected market price per share of A Ltd after the
acquisition, assuming PE multiple remains unchanged?
5. Determine the market value of the merged firm.
Page 1 of 3
 OR
Q.4 (a) State the major methods of effecting payment of consideration to the 07
shareholders of target company. Explain features of each method in detail.
(b) Firm Alpha plans to acquire firm Beta. Following are the pre-merger vital 07
statistics of the two firms:
Alpha (A) Beta (B)
Market Price Per Share (in Rs.) 50 20
Book Value Per Share (in Rs.) 34 16
Number of Outstanding Shares 4,50,000 2,25,000
Market Value of the Firm (in Rs.) 2,25,00,000 45,00,000
Firm Alpha offers to the shareholders of Firm Beta one share in exchange
for every two shares held by them in Beta Ltd. The merger is expected to
bring gains, which have a PV of Rs. 50 lakh. Calculate the amount of
benefits to both companies.
Q.5 Following information are available in respect of XYZ ltd which is 14
expected to grow at a higher rate for 4 years after which growth rate will
stabilize at a lower level:
Base year information:
Revenues Rs. 2,000 Crores
EBIT Rs. 300 Crores
Capital Expenditure Rs. 280 Crores
Depreciation Rs. 200 Crores

Information for high growth and stable growth are as follows:

High Growth Stable Growth
Growth in Revenue & EBIT 20% 10%
Growth in Capital 20% Capital expenditure
Expenditure & Depreciation are offset by
depreciation
Risk Free Rate 10% 9%
Equity Beta 1.15 1
Market Risk Premium 6% 5%
Pre-tax cost of debt 13% 12.86%
Debt Equity Ratio 1:1 2:3
For all time, working capital is 25% of revenue and corporate tax rate is
30%. What is the value of the firm?
OR
Q.5 Balance sheet of diamond Ltd. As on 31st March, 2010: 14
Liabilities Rs. in Assets Rs. in
Lakhs Lakhs
Equity Share Capital 200 Land & Building 110
(of Rs. 100 each fully
paid up)
General Reserve 40 Plant & Machinery 130
Profit & Loss Account 32 Patents & Trademarks 20
Sundry Creditors 128 Stock 48
Provision for Income 60 Sundry Debtors 88
Tax
Bank Balance 52
Preliminary Expenses 12
460 460

Page 2 of 3
The expert valuer valued the land and building at Rs. 240 lakhs, goodwill
at Rs. 160 lakhs and plant and machinery at Rs. 120 lakhs. Out of the total
debtors, it is found that debtors for Rs. 8 lakhs are bad.

The profits of the company have been as follows:

Rs. In Lakhs
For the year 2007-08 92
For the year 2008-09 88
For the year 2009-10 96
The company follows the practice of transferring 25% of profits to general
reserve. Similar type of companies earn at 10% of the value of their shares.
Plant and Machinery and land and building have been depreciated at 15%
and 10% respectively.
Ascertain the value of shares of the company under: (1) Intrinsic Value
Method (Net Assets Method) (2) Yield Method (3) Fair Value Method.

*************

Page 3 of 3
Seat No.: ________ Enrolment No.___________

GUJARAT TECHNOLOGICAL UNIVERSITY

MBA - SEMESTER– IV EXAMINATION – WINTER 2020
Subject Code:3549221 Date:04/01/2021
Subject Name:Mergers & Acquisition (M & A)
Time:02:00 PM TO 04.00 PM Total Marks: 47
Instructions:
1. Attempt any THREE questions from Q1 to Q6.
2. Q7 is compulsory.
3. Make suitable assumptions wherever necessary.
4. Figures to the right indicate full marks.

Q. Question Text and Description Marks

No.
Q.1 Answer the following questions in brief 06
a
(a) Inbound transaction
(b) Leverage buy out
(c) Hostile takeover

Q.1 Answer the following questions in brief 06

b
a) Differentiate between horizontal and vertical merger
b) ESOP
c) Net asset valuation

Q.2 (a) Define Corporate Restructuring and explain its various types in 06
detail
(b) List down various legal provisions of Mergers and Acquisitions 06
under Companies Act 2013

Q.3 (a) What is divestiture? Explain its various types and reasons in detail 06
(b) Write a detailed note on Competition Act 06

Q.4 (a) Explain various approaches of valuation in detail 06

(b) XYZ Ltd. is considering merger with ABC Ltd. XYZ Ltd.’s 06
shares are currently traded at Rs. 25. It has 2,00,000 shares
outstanding and its profits after taxes (PAT) amount to Rs. Rs.
4,00,000. ABC Ltd. has 1,00,000 shares outstanding. Its current
market price is Rs. 12.50 and its PAT are Rs. 1,00,000. The
merger will be effected by means of a stock swap (exchange).
ABC Ltd. has agreed to a plan under which XYZ Ltd. will offer
the current market value of ABC Ltd.’s shares

Find out (i) What is the pre-merger earnings per share (EPS) and
P/E ratios of both the companies? (ii) If ABC Ltd.’s P/E ratio is
8, what is its current market price? What is the exchange ratio?
What will XYZ Ltd.’s post-merger EPS be? (iii) What must the
exchange ratio be for XYZ Ltd.’s that pre and post-merger EPS to
be the same?

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Q.5 (a) What are the motives behind M & A in India? Also explain, why 06
mergers fail in India?
(b) Write a detailed note on Pooling of interest method and purchase 06
method of accounting. Also differentiate between both

Q.6 (a) What are the benefits and difficulties of Cross border 06
acquisitions?
(b) A Ltd. is considering takeover of B Ltd. and C Ltd. The 06
financial data for the 3 companies are given below:
Particulars A B C
Equity Share Cap of Rs 10 each (Rs. 450 180 90
in cr)
Earning (Rs. in cr) 90 18 18
MP per share 60 37 46
1. Find out P/E ratios of all the 3 companies.
2. Also find Exchange ratio on the basis of its PE.
3. Justify whether A ltd should acquire B and C Ltd., both or
either of the companies on the basic of their post
acquisition EPS

Q.7 Read the below given case and answer the following question
In 1926, the merger of two German automobile manufacturers Benz &
Co. and Daimler Motor Company formed Stuttgart-based, German
company Daimler-Benz. Its Mercedes cars were arguably the best
example of German quality and engineering. In 1998, Daimler-Benz
and U.S. based Chrysler Corporation, two leading global car
manufacturers, agreed to combine their businesses in what was
perceived to be a ‘merger of equals’. Jurgen Schrempp, CEO of
Daimler-Benz and Robert Eaton, Chairman and CEO of Chrysler
Corporation met to discuss the possible merger. This major cross-border
transaction, with an equity value of $36 billion, was the largest merger
of its kind to date. Robert Eaton and Jürgen E. Schrempp, co-chairmen
of DCX, announced their expectation that this deal would be “not only
the best strategic merger or the best prepared merger, but also the best
executed merger.”
Daimler-Benz Chief Executive Jürgen Schrempp had concluded as
early as 1996 that his company’s automotive operations needed a
partner to compete in the increasingly globalized marketplace.
Chrysler’s Eaton was drawing the same conclusion in 1997 based on
two factors emerging around the same time: the Asian economic crisis,
which was cutting into demand, and worldwide excess auto
manufacturing capacity, which was looming and would inevitably lead
to industry consolidation. With annual global overcapacity as high as
18.2 million vehicles predicted for the early 21st century, it became
clearer that Daimler-Benz and Chrysler could survive as merely
regional players if they continued to go it alone.
The merged entity ranked third (after GM and Ford) in the world in
terms of revenues, market capitalization and earnings, and fifth (after
GM, Ford, Toyota and Volkswagen) in the number of units (passenger-
cars and commercial vehicles combined) sold. In 1998, co-chairmen
and co-CEOs, Schrempp and Eaton led the merged company to
revenues of $155.3 billion and sold 4 million cars and trucks. But in
2000, it suffered third quarter losses of more than half a billion dollars,
and projections of even higher losses in the fourth quarter and into 2001.
In early 2001, the merged company announced that it would slash
26,000 jobs at its ailing Chrysler division.
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 The two companies fit well together geographically, Daimler strong in
Europe and Chrysler in North America, and in terms of product lines,
with Daimler’s luxurious and high-quality passenger cars and
Chrysler’s line of low-production-cost trucks, minivans, and sport
utility vehicles. Although this was ostensibly a merger of equals–the
company set up co-headquarters in Stuttgart and Auburn Hills, naming
Eaton and Schrempp co-chairmen–it soon became clear that the
Germans were taking over the Americans. DaimlerChrysler was set up
as a German firm for tax and accounting purposes, and the early 2000
departures of Thomas Stallkamp, the initial head of DaimlerChrysler’s
U.S. operations, and Eaton (who was originally slated to remain until as
late as November 2001) left Schrempp in clear command of the
company. In early 2000, DaimlerChrysler set the lofty goal of becoming
the number one automaker in the world within three years. The
company’s most pressing needs were to bolster its presence in Asia,
where less than 4 percent of the company’s overall revenue was
generated, and to gain a larger share of the small car market in Europe.
Filling both of these bills was DaimlerChrysler’s purchase of a 34
percent stake in Mitsubishi Motors Corporation for $2 billion, a deal
announced in late March.
The company later increased its interest in Mitsubishi when it purchased
a 3.3 percent stake from Volvo. In another key early 2000 development,
DaimlerChrysler agreed to join with GM and Ford to create an Internet-
based global business-to-business supplier exchange named Covisint.
Analysts felt that though strategically, the merger made good business
sense. But contrasting cultures and management styles hindered the
realization of the synergies. Daimler-Benz attempted to run Chrysler
USA operations in the same way as it would run its German operations.
Daimler-Benz was characterized by methodical decision-making. On
the other hand, the US based Chrysler encouraged creativity. While
Chrysler represented American adaptability and valued efficiency and
equal empowerment Daimler-Benz valued a more traditional respect for
hierarchy and centralized decision-making.

(a) Was it really a merger of equals or a takeover? Justify your answer 5.5

(b) Explain the role of external environmental factors in determining 5.5

the corporate strategy of this deal

OR
(a) Discuss the challenges and problems Chrysler felt post merger 5.5

(b) What strategic moves the post-merged company has taken to

gain competitive advantage

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