Download GTU (Gujarat Technological University) MBA 2019 Winter 4th Sem 3549221 Mergers And Acquisition M And A Previous Question Paper
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:
a. Corporate Restructuring
b. Spin Off
c. Consolidation
d. ESOP
e. Reverse Merger
f. Leverage Buy Out
g. Synergy
14
Q.2 (a) Differentiate Mergers & Acquisition. Discuss various motives for M&A
citing recent examples of M&A in India.
07
(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?
What are the benefits of divestitures?
07
(b) Explain the concept of cross border acquisitions and state the problems
encountered in cross border acquisitions.
07
Q.4 (a) Highlight the differences between the Pooling of Interest Method &
Purchase Method with respect to Accounting Standard 14.
07
(b) A Ltd wants to acquire T Ltd. and has offered a swap ratio of 1:2 (0.5
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.
07
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Page 1 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:
a. Corporate Restructuring
b. Spin Off
c. Consolidation
d. ESOP
e. Reverse Merger
f. Leverage Buy Out
g. Synergy
14
Q.2 (a) Differentiate Mergers & Acquisition. Discuss various motives for M&A
citing recent examples of M&A in India.
07
(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?
What are the benefits of divestitures?
07
(b) Explain the concept of cross border acquisitions and state the problems
encountered in cross border acquisitions.
07
Q.4 (a) Highlight the differences between the Pooling of Interest Method &
Purchase Method with respect to Accounting Standard 14.
07
(b) A Ltd wants to acquire T Ltd. and has offered a swap ratio of 1:2 (0.5
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.
07
Page 2 of 3
OR
Q.4 (a) State the major methods of effecting payment of consideration to the
shareholders of target company. Explain features of each method in detail.
07
(b) Firm Alpha plans to acquire firm Beta. Following are the pre-merger vital
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.
07
Q.5 Following information are available in respect of XYZ ltd which is
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
Expenditure & Depreciation
20% Capital expenditure
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?
14
OR
Q.5 Balance sheet of diamond Ltd. As on 31
st
March, 2010:
Liabilities Rs. in
Lakhs
Assets Rs. in
Lakhs
Equity Share Capital
(of Rs. 100 each fully
paid up)
200 Land & Building 110
General Reserve 40 Plant & Machinery 130
Profit & Loss Account 32 Patents & Trademarks 20
Sundry Creditors 128 Stock 48
Provision for Income
Tax
60 Sundry Debtors 88
Bank Balance 52
Preliminary Expenses 12
460 460
14
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Page 1 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:
a. Corporate Restructuring
b. Spin Off
c. Consolidation
d. ESOP
e. Reverse Merger
f. Leverage Buy Out
g. Synergy
14
Q.2 (a) Differentiate Mergers & Acquisition. Discuss various motives for M&A
citing recent examples of M&A in India.
07
(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?
What are the benefits of divestitures?
07
(b) Explain the concept of cross border acquisitions and state the problems
encountered in cross border acquisitions.
07
Q.4 (a) Highlight the differences between the Pooling of Interest Method &
Purchase Method with respect to Accounting Standard 14.
07
(b) A Ltd wants to acquire T Ltd. and has offered a swap ratio of 1:2 (0.5
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.
07
Page 2 of 3
OR
Q.4 (a) State the major methods of effecting payment of consideration to the
shareholders of target company. Explain features of each method in detail.
07
(b) Firm Alpha plans to acquire firm Beta. Following are the pre-merger vital
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.
07
Q.5 Following information are available in respect of XYZ ltd which is
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
Expenditure & Depreciation
20% Capital expenditure
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?
14
OR
Q.5 Balance sheet of diamond Ltd. As on 31
st
March, 2010:
Liabilities Rs. in
Lakhs
Assets Rs. in
Lakhs
Equity Share Capital
(of Rs. 100 each fully
paid up)
200 Land & Building 110
General Reserve 40 Plant & Machinery 130
Profit & Loss Account 32 Patents & Trademarks 20
Sundry Creditors 128 Stock 48
Provision for Income
Tax
60 Sundry Debtors 88
Bank Balance 52
Preliminary Expenses 12
460 460
14
Page 3 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.
*************
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This post was last modified on 19 February 2020