MERGER AND ACQUISITIONS ISBM ONGOING EXAM ANSWER PROVIDED
CONTACT:DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com
MERGERS AND ACQUISITIONS
CASE STUDY : 1
ABC Ltd. is considering the acquisition of XYZ Ltd. The management of ABC believes that the cost of goods sold could be reduced by 1.5 percent over the next 8 Years (due to purchasing economies) and administrative expenses could be brought down by 3 per cent. The forecost of income statement of XYZ under ABC is given under.
In US $ ‘000’
Year
1
2
3
Sales
60,000
63,000
66,000
COG8
30,000
31,000
33,000
Depreciation
4,000
4,200
4,300
SGA
21,000
22,000
22,500
Assume that cash flow increases at 7% after year 3.
ABC needs to incur expenditure on fixed assets and working capital to make operational improvement to XYZ, the details of which are given here.
Year
1
2
3
Capex
4900
5100
5300
W.C.
(510)
(540)
(550)
Q1) Explain the free cash flow valuation?
Q2) What are the several approaches for measuring the value of the target firm?
Q3) At a discount rate of 13% what is the maximum price that ABC should pay?
Q4) At a discount rate of 18% what is the minimum price ABC should pay?
CASE STUDY : 2
Employee ownership is growing rapidly in many countries around the world. The United States has been leader in the development of employee ownership, through Employee Stock ownership plans (ESOPs). These are about 11500 ESOPs in the US covering an estimated 8.5 million employees. It is estimated that approximately 20 per cent of all public companies in the US now offer options to all or most employee, at least 5 times what the number was at the beginning of the 1990s.
Q1) What is and ESOPs explain in detail?
Q2) Why are company’s applying ESOPs?
Q3) What are ESOPs application explain?
Q4) Do you think ESOPs is beneficial to company and company’s employee as well?
CASE STUDY : 3
When a firm’s condition deteriorates to the extent where he cannot meets its financial obligations, the firm is said to be in financial distress usually the first signals of distress are violation of debt convenants and suspensions of dividends. Bankruptcy includes financial reorganization and liquidation. Financial reorganization involves rearranging a firm’s cash flows whereas liquidation ends the firms operation. It involves selling of tangible assets and paying off claimmates to the extent possible. Recenet examples of distressed firms are Lehman Bros, Enron, Scity Bank, Marvel Entertainment, Iridium, etc. Some of these companies once considered the darling of the investment community.
Q1) What do you think why do some apparently well run companies get into financial distress? What are the causes?
Q2) Explain in detail the surveys the bankruptcy code in the US?
Q3) Suggest a methodology for valuation of bankrupt firms?
Q4) Summarizes the results of academic studies on various aspects of bankruptcy?
CASE STUDY : 4
Below the option – pricing table from a standard corporate finance text like the one by Brearly & Myers.
S = US $ 3 million
X = US $ 3.5 million
R = 5 per cent
T = 5 Years
Volatility = 35 per cent p.a.
Q1) Explain the term option?
Q2) What are the types of options all over world explain in detail?
Q3) Explain in detail Real option and different types of real option?
Q4) Given the above values, calculate the value of the call option?
CONTACT:DR. PRASANTH MBA PH.D. DME MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com
MERGERS AND ACQUISITIONS
CASE STUDY : 1
ABC Ltd. is considering the acquisition of XYZ Ltd. The management of ABC believes that the cost of goods sold could be reduced by 1.5 percent over the next 8 Years (due to purchasing economies) and administrative expenses could be brought down by 3 per cent. The forecost of income statement of XYZ under ABC is given under.
In US $ ‘000’
Year
1
2
3
Sales
60,000
63,000
66,000
COG8
30,000
31,000
33,000
Depreciation
4,000
4,200
4,300
SGA
21,000
22,000
22,500
Assume that cash flow increases at 7% after year 3.
ABC needs to incur expenditure on fixed assets and working capital to make operational improvement to XYZ, the details of which are given here.
Year
1
2
3
Capex
4900
5100
5300
W.C.
(510)
(540)
(550)
Q1) Explain the free cash flow valuation?
Q2) What are the several approaches for measuring the value of the target firm?
Q3) At a discount rate of 13% what is the maximum price that ABC should pay?
Q4) At a discount rate of 18% what is the minimum price ABC should pay?
CASE STUDY : 2
Employee ownership is growing rapidly in many countries around the world. The United States has been leader in the development of employee ownership, through Employee Stock ownership plans (ESOPs). These are about 11500 ESOPs in the US covering an estimated 8.5 million employees. It is estimated that approximately 20 per cent of all public companies in the US now offer options to all or most employee, at least 5 times what the number was at the beginning of the 1990s.
Q1) What is and ESOPs explain in detail?
Q2) Why are company’s applying ESOPs?
Q3) What are ESOPs application explain?
Q4) Do you think ESOPs is beneficial to company and company’s employee as well?
CASE STUDY : 3
When a firm’s condition deteriorates to the extent where he cannot meets its financial obligations, the firm is said to be in financial distress usually the first signals of distress are violation of debt convenants and suspensions of dividends. Bankruptcy includes financial reorganization and liquidation. Financial reorganization involves rearranging a firm’s cash flows whereas liquidation ends the firms operation. It involves selling of tangible assets and paying off claimmates to the extent possible. Recenet examples of distressed firms are Lehman Bros, Enron, Scity Bank, Marvel Entertainment, Iridium, etc. Some of these companies once considered the darling of the investment community.
Q1) What do you think why do some apparently well run companies get into financial distress? What are the causes?
Q2) Explain in detail the surveys the bankruptcy code in the US?
Q3) Suggest a methodology for valuation of bankrupt firms?
Q4) Summarizes the results of academic studies on various aspects of bankruptcy?
CASE STUDY : 4
Below the option – pricing table from a standard corporate finance text like the one by Brearly & Myers.
S = US $ 3 million
X = US $ 3.5 million
R = 5 per cent
T = 5 Years
Volatility = 35 per cent p.a.
Q1) Explain the term option?
Q2) What are the types of options all over world explain in detail?
Q3) Explain in detail Real option and different types of real option?
Q4) Given the above values, calculate the value of the call option?
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