Question Paper 2007

Answer any TEN QUESTIONS.
All questions carry equal marks.
Answer any question in maximum 20 lines.



1. Discuss briefly the motives behind acquisition of businesses and companies by existing companies and describe briefly the types of acquisitions that they make to satisfy the specific motives.

2 What is due diligence? Explain important steps in it.

3. What are the provisions of Income tax Act regarding income from business and profession? Examine their relevance when a company is acquiring another company.


4. Explain the provisions of accounting standard AS-14.


5. ABC Limited acquired PQR Limited for a consideration of Rs.40,00,000 to be satisfied in the form of fully paid equity shares of Rs.10 each. The balance sheets of the two companies on 31st March 2006, the date of acquisition were as follows:


Table not included


You are required to pass the necessary journal entries in the books of the transferee company and prepare the balance sheet, when amalgamation is by way of purchase. The development rebate reserve and Export profit reserve are to be maintained in the books of the transferee to claim the accompanying benefits.

6. A company’s present revenues are one million dollars. An analyst made the following estimates regarding the future performance.

Sales growth: 20 percent for the next five years and zero from then on.
Operating cost: 82% of the sales revenue.
Taxes: 38% of the operating income.
Incremental working capital requirements: 8% of the annual revenues in the years where revenue growth is there..
Incremental investment in plant and machinery; 2% of the annual revenues in the years where revenue growth is there.

Calculate the free cash generated by the company in the future years.

7. What is strategy? According to Michael Porter, what are the steps in strategy formulation? How do acquisitions support Michael Porter’s conception of strategy?

8. Give a brief account of steps involved in initiating and completing a merger in India.

9. Describe the important points in SEBI Guidelines regarding takeover in India.

10. Explain the important steps to be taken up by a company to successfully integrate an acquired unit with its operations.

11. Describe briefly various theories put forward in the area of acquisitions and mergers.

12. Explain any two empirical studies that were done in the area of acquisitions and mergers.

13. Discuss the reasons why companies divest some divisions and discuss any one empirical study on the performance of companies and that divested the divisions and companies that acquired the divisions.


14. ABC Limited acquired PQR Limited for a consideration of Rs.30,00,000 to be satisfied in the form of 2,00,000 fully paid equity shares of Rs.10 each. The balance sheets of the two companies on 31st March 2006, the date of acquisition were as follows:

Table not included

You are required to pass the necessary journal entries in the books of the transferee company and prepare the balance sheet, when amalgamation is by way of merger

Mergers and Acquisitions Course Plan - 2008

Topics/chapters to be covered

Prescribed Text: Fred Weston/Mitchell/Mulherin

Ch.1 The Takeover process

Ch.2 The legal and Regulatory Framework - Instead of the material in the chapter Indian framework on mergers and SEBI regulations on takeovers will be discussed.

Ch.3 Accounting for M&As - Instead of material in the chapter, Indian Accounting Standard AS-14 will be discussed.
Book to be referred - Maheshwari and Maheshwari Advanced Accounting Volume 2, Chapter on Amalgamations

Ch.4 Deal Structuring: Some Indian legal issues may be discussed

Ch.5. Strategic Issues

Ch.6. Theories of Mergers and Tender Offers

Ch.7. The Timing of Merger Activity

Ch.8. Empirical Tests of M&A Performance

Ch.9. Alternative Approaches of Valuation

Ch.10. Increasing the value of the Organization

Ch.11. Corporate Restructuring and Divestitures

Ch.12. Empirical tests of Corporate Restructuring and Divestitures

Ch.16. Going private and Leveraged buyouts

Ch.17. International Takeovers and Restructuring

Ch.22. Implementation and Management Guides for M&A s
-----Duel Diligence
-----Integration